McGrane, the world No220, hit a bogey-free round and picked up eight birdies – including three in a row between the 11th and 13th – to take the clubhouse lead.
Then Goddard, ranked 1349 in the world, picked up shots at the sixth, seventh, eighth and ninth to join him on an eight-under 64.
Goddard had earlier picked up four strokes on the back nine, with two birdies and an eagle two at the 11th at the Penha Longa Golf Club.
Dane Eirik Tage Johansen and Welshman Stuart Manley were one shot back after shooting 65s, Johansen collecting seven birdies and a bogey.
Manley enjoyed a more mixed round, with five birdies and eagles at the sixth and 12th marred by a pair of bogies.
Another English representative, Richard Bland, was two back for a share of fifth with Andrew Tampion but Chris Wood – the highest ranked player in the field at 81st – was part of an 11-man tie for 23 having signed for 69.
Andrew Coltart was the highest placed of the five Scots in the field, the Dumfries born 40-year-old sharing 16th place, just four shots off the pace after shooting a 68. A shot behind him was former Sir Henry Cotton Rookie of the Year Scott Drummond who shared Wood's score of 69.
Further down the field, Marc Warren registered an even par 72, while Alastair Forsyth and Steven O'Hara scored a 73 and 76 respectively.
Goddard, who turned professional last October after an impressive amateur career, only came into the field on Monday after earning a sponsor's invitation.
The 21-year-old 2009 Walker Cup player and former English Amateur champion came to Portugal having missed every cut he had made as a professional.
To try to change his luck he brought his girlfriend Lucy to caddie for him again.
"I was just plodding along and then holed four putts from nowhere," said Goddard.
"I've not had much success as a pro and Lucy caddied for me when I finished first, second and fifth as an amateur, so I decided to bring her out here."