Hector Tapia's men remain unbeaten through four matches and usurped Palestino on goals scored to sit pretty in first place - with the teams equal on 10 points and goal difference of plus-six.
It took Colo Colo 38 minutes to find their first goal on Saturday at the Estadio Tierra de Campeones.
Esteban Paredes received a long ball from defence, and went on a dazzling run down the left side of the park before looping a cross into the back post where Emiliano Vecchio did the rest from a sharp angle.
Gonzalo Fierro doubled Colo Colo's lead a minute out from half-time, converting a penalty given after Paredes was fouled inside the area.
After having a big hand in the first two goals, Paredes was finally handed his chance to score - and he scuffed a shot into the back of the net despite a late lunge from an Iquique defender.
Fierro then was tripped inside the area, handing Colo Colo their chance for a fourth - and Felipe Flores duly converted from the spot.
Rodrigo Diaz gave the home fans something to cheer about, when in the 65th minute, he lashed home an unstoppable long-range left-footed strike to pull a goal back.
But there would be more pain for Iquique, as Mauricio Zenteno was dismissed on 71 minutes - earning a second yellow for a sliding challenge on Flores.
Fierro added his second, and Colo Colo's fifth, when he finished off a well-worked move six minutes later, before Iquique scored another consolation goal via Santiago Romero in injury time.
Palestino had moved top earlier on the weekend, with a late 1-0 home win over Universidad Concepcion.
Nicolas Suarez scored in the 90th minute to preserve their unbeaten status - one of four teams without a loss so far - and also condemn Concepcion to their first loss after three straight wins.
O'Higgins sit fourth, and are also unbeaten, after they accounted for bottom side Everton 2-0 away from home.
Universidad Catolica battled with 10 men for the best part of the second half but held on for a 1-1 draw away to Audax Italiano.
A Gustavo Canales brace saw Union Espanola to a 2-1 road win over Huachipato, while Antofagasta - the other unbeaten team - earned their first win of the season with a 1-0 victory over Cobresal.
Union La Calera snapped a two-match losing run when they beat Rangers 3-1 at home, Universidad Chile thrashed Nublense 5-0 and Santiago Wanderers and Cobreloa played out a 2-2 draw.
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