Atwal's 67 was matched by five others, as England's Chris Paisley seized the clubhouse lead with seven-under 65.
Atwal, who is aiming for a third victory in Malaysia but his first Asian Tour win since 2014, opened on the back nine and had three birdies against one bogey on the back stretch of the Saujana Golf and Country Club. He then fired more birdies one bogey in his card.
Khalin Joshi and Jyoti Randhawa were also at three-under, but were yet to finish their opening round and Shubhankar Sharma and Shiv Kapur (70 each) were tied 51st while Rashid Khan (72) was tied 72nd.
Ajeetesh Sandhu (74) and Chiragh Kumar (75) were further down, while Rahil Gangjee, at one-under, and S Chikkarangappa, at one-over, were yet to finish their rounds.
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"It was hot, very hot. I don't remember the last time being this hot. I'm pleased, it was a solid start to round one. Everything was pretty okay, I can't pinpoint which part of my game was better. Everything was solid," Atwal said.
The 31-year-old Paisley fired a bogey-free seven-under- par 65 to continue his fine form where he won and finished fifth twice in his last three European Tour events in 2018.
The Englishman carded seven birdies to hold a one-shot advantage over countryman David Horsey while Frenchman Mike Lorenzo-Vera was six-under with two holes to play before fading light forced officials to stop play at 7.30 pm local time.
Paisley won the South African Open in January and followed up on that victory by finishing tied fifth in Abu Dhabi and Dubai respectively. He returned with seven birdies thanks to his sharp-shooting game where he hit 17 out of 18 greens in regulation.
A total of 40 players will return at 7.50am tomorrow to complete round one.