McDonald had a less conventional round which included four birdies, two bogeys, a double bogey and a hole in one at the par-three 12th.
Kim is playing her first tournament on the LPGA since winning the KPMG Women's PGA major.
"She made a hole-in-one, it was almost a one-shot lead," Kim said. "I got a little bit pressured, but I try to focus on my game."
"I feel like the same, but when standing on the first tee, the announcer [said], 'This is a major champion, Sei Young Kim.' When I heard that, it feels like, 'Oh, yeah, I got that.'"
She left McDonald behind with the birdie spree from 14 to 17.
"I just trying to keep push myself until the last hole," Kim said. "Just keep pushing. I think that is way to make more birdies."
McDonald said her strategy paid off with the hole in one.
"It was playing like 115 front, 127 hole, and there was a little bit of downwind," McDonald said. "So, I thought a 115 shot, just playing the front edge, would be enough to pitch it a few yards on and let it release.
"Honestly, this is kind of how my strategy works, was everything told me to look a couple paces right of it, so I did. That's kind of my strategy, because I wasn't looking at the hole, but then it went in."
McDonald struggled on the greens late.
"I felt like I played really solid during that stretch," McDonald said. "I hit good shots. Just unfortunately, my speed got a little off, especially 16, 17, 18. For a little bit, I kind of lost my touch with the putter."
Stephanie Meadow was third at eight-under after a 68 in the first-year tournament originally set for the same week as the PGA Championship in May.
Brooke Henderson (66), Minjee Lee (67) and Austin Ernst (65) were six-under, a shot behind Ko.
- With AP