Otto won the competition in 2008 and has led this year's tournament after each day at La Mandria - shooting a 10-under 62 on Friday to ensure a healthy halfway lead.
However, he only just broke par on the third day in Turin and was largely reliant on those around him also enduring relatively poor days.
A double-bogey seven on the ninth hole undermined the world number 160, but Otto mixed three birdies with a solitary dropped shot after the turn to complete a 71 and stay on course for a third career title.
Bernd Wiesberger and Ross Fisher, second and third respectively at the halfway mark, made it round in one and two under respectively on Saturday.
At 16 under, Otto will enter the final round two clear of Scotland's Richie Ramsay, who carded a 66, with Wiesberger a shot further back and Fisher five off the pace.
Stephen Gallacher's bid to secure a place in Paul McGinley's European Ryder Cup team remains alive after a round of 69.
Gallacher needs to finish in the top two to usurp Graeme McDowell and secure the final automatic qualification spot for next month's event at Gleneagles.
"It keeps me in touching distance," the sixth-placed Scot told the European Tour website.
"The worst thing I could have done was open up a big gap which was insurmountable.
"I've not done that so a good day on Sunday and I am still right in there. I had about four lip-outs today but they went in on Friday and I holed a couple of good putts at the end so it evens itself out."