Mulroy shot seven birdies and one bogey in his six-under-par 66 in the third round at Royal Park in Turin.
Gonzalo Fernandez-Castano is in second place after his five-under 67 on Saturday, while Rafa Cabrera-Bello and Pablo Larrazabal are a stroke further back after rounds of 65 and 66 respectively.
Colsaerts, four shots off the pace at 13 under, stayed in contention with a dazzling seven-under round of 65 less than two weeks before the start of the Ryder Cup in Illinois.
The Belgian birdied four holes in succession around the turn and six of his first 11.
Europe team-mate Martin Kaymer of Germany is another of a group of players on 13 under after a 67 on Saturday.
Englishman Richard Bland, the overnight leader, is in the same group after slipping back with a third-round 71.
Mulroy said it would be a welcome boost to win on European soil for the first time following three victories on home soil and two on the Nationwide Tour in America.
"I said on the first day the course reminds me a lot of a South African course," he told the European Tour's website. "The trees, the shape, and the ball goes a little further too.
"I haven't played so well this year. It would be a big thing to win on mainland Europe, especially with the purse here and the two-year exemption. I don't win very often so I'd take any win."