With the Estoril track having completely dried up from the morning rain, riders were finally able to get some useful preparations done.
Pedrosa was quick early on in the session and, despite seeing first Colin Edwards and then Valentino Rossi move to the top of the timesheets near the end, the winner of the Spanish Grand Prix was able to respond in the closing minutes to set a best lap of 1:38.507.
The Spaniard nearly missed his chance, though, when he was accidentally blocked by Alex de Angelis during a quick run and had to abort that lap.
Rossi ended up second fastest, just four hundredths of a second behind Pedrosa, while Edwards will have been very encouraged by his showing on the Tech 3 Yamaha.
Pedrosa's teammate Nicky Hayden was fourth fastest, having run off the track at one point after missing a braking point. The American finished ahead of Jorge Lorenzo and Andrea Dovizioso on the timesheets.
MotoGP champion Casey Stoner had a frustrating afternoon, having been comfortably quickest in the morning session.
The Ducati Marlboro rider fell off in the opening minutes of the session and, having resumed after 20 minutes, he then managed to save a huge tank slapper.
Stoner then spent a lot of time in the pits as mechanics worked on his bike and, despite completing 19 laps, he could manage no better than seventh.
The only other major incident was when Toni Elias appeared to suffer a spectacular engine failure on the start-finish straight on his Alice Team Ducati.
Pos Rider Team Time Laps
1. Dani Pedrosa Repsol Honda Team 1:38.507 26
2. Valentino Rossi Fiat Yamaha Team 1:38.547 + 0.040 26
3. Colin Edwards Tech 3 Yamaha 1:38.632 + 0.125 28
4. Nicky Hayden Repsol Honda Team 1:38.688 + 0.181 28
5. Jorge Lorenzo Fiat Yamaha Team 1:38.868 + 0.361 24
6. Andrea Dovizioso JiR Team Scot MotoGP 1:39.171 + 0.664 27
7. Casey Stoner Ducati Marlboro Team 1:39.202 + 0.695 19
8. Shinya Nakano San Carlo Honda Gresini 1:39.309 + 0.802 26
9. Randy De Puniet LCR Honda MotoGP 1:39.332 + 0.825 25
10. John Hopkins Kawasaki Racing Team 1:39.474 + 0.967 23
11. Loris Capirossi Rizla Suzuki MotoGP 1:39.591 + 1.084 20
12. Chris Vermeulen Rizla Suzuki MotoGP 1:39.946 + 1.439 26
13. James Toseland Tech 3 Yamaha 1:40.055 + 1.548 21
14. Alex De Angelis San Carlo Honda Gresini 1:41.033 + 2.526 22
15. Marco Melandri Ducati Marlboro Team 1:41.112 + 2.605 21
16. Anthony West Kawasaki Racing Team 1:41.572 + 3.065 25
17. Sylvain Guintoli Alice Team 1:41.875 + 3.368 21
18. Toni Elias Alice Team 1:43.262 + 4.755 11
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