Chasing his first European Tour title, Paisley carded a third round of 70 at Glendower Golf Club to finish 15 under par, with Grace just a shot behind after a 66.
Grace's chances looked to be fading fast when a bogey on the ninth left him six shots off the pace, but the 29-year-old South African birdied five of his last eight holes to pile the pressure on Paisley.
"Being tied for the lead isn't a position I've been in a lot," the 31-year-old from Hexham said after a round containing three birdies and a solitary bogey on the 16th.
"I'm really proud with how I've played, I felt really calm and never really felt stressed.
"Obviously playing with Gracie [in the final round], who's won God knows how many times on Tour and obviously is a great player, and in his home country.... I'm sure the crowd is going to be on his side. I'm just really excited about it."
Grace, who became the first man to shoot 62 in a major in last year's Open Championship, claimed the most recent of his eight European Tour wins on home soil in the Nedbank Golf Challenge in November.
"I got frustrated out there to be quite honest," Grace admitted. "I thought I hit the ball superbly through 13 holes, but just couldn't get it in the hole.
"I'm looking forward to tomorrow big time. I've played myself right back into it and I'm really excited going into tomorrow. It will be a big advantage to have that [home] support."
France's Adrien Saddier, who shared the halfway lead with Paisley, could only manage a third round of 73 to fall three shots off the pace alongside American Chase Koepka and South Africa's Jacques Blaauw.
South Africa's Darren Fichardt is a shot further back after surging through the field with a brilliant 64 which featured eight birdies in the last 12 holes.