Having recovered from the smoky cockpit dramas of the morning, the Finn eclipsed team-mate Felipe Massa, setting the fastest lap of the weekend so far - 1:35.707.
It wasn't a trouble-free session for the Finn though, as the team came over the radio at the end of the session reporting a problem with his Kinetic Energy Recovery System (KERS).
Sebastian Vettel confirmed Red Bull's growing potential in third, while Nico Rosberg was fourth for Williams.
Unlike the first session in Malaysia, the teams got cracking straight away as dark clouds gathered and the omnipresent threat of monsoon conditions loomed.
McLaren wasted no time, having lost a great deal of it in the garage in the first 90 minutes, and Heikki Kovalainen was the first to go fastest, swiftly followed by Massa.
Within five minutes, 19 cars were on track and before long, Vettel, Kazuki Nakajima, Giancarlo Fisichella, Rosberg and Lewis Hamilton had all enjoyed a spell at the top of the times.
The carousel effect continued through the first half of the session as Jarno Trulli and Adrian Sutil also shot to the top.
Forty minutes in, though, and Nakajima thumped in a fast one – 1:36.34. It was another ten minutes before Vettel eclipsed that.
But as clouds continued to gather, though they never produced more than a few spots of rain, with half an hour to go, Ferrari, having already suggested that Sepang might suit it better than Melbourne, turned up the wick.
Massa went out and set three consecutive laps faster than anyone had done all weekend, ending the sequence with an exceptional 1:35.832. Only to then see Raikkonen go faster still with a 1:35.706. No one got near that.
Behind Vettel and Rosberg, who both improved late-on, was Mark Webber. Rubens Barrichello was the fastest of the Brawns ahead of team-mate Jenson Button.
Nakajima eventually dropped down to ninth ahead of Nelson Piquet – who led Renault's challenge with Fernando Alonso limiting his running due to his ear infection.
Once again several cars ran off track, but none more seriously than Giancarlo Fisichella who swiped his Force India against the barrier at Turn 10.It was a shame for the Italian who had shown strongly during the session, but ended the it 19th.
Pos Driver Team Time Laps
1. Raikkonen Ferrari (B) 1:35.707 40
2. Massa Ferrari (B) 1:35.832 + 0.125 38
3. Vettel Red Bull-Renault (B) 1:35.954 + 0.247 40
4. Rosberg Williams-Toyota (B) 1:36.015 + 0.308 39
5. Webber Red Bull-Renault (B) 1:36.026 + 0.319 36
6. Barrichello Brawn-Mercedes (B) 1:36.161 + 0.454 37
7. Button Brawn-Mercedes (B) 1:36.254 + 0.547 31
8. Nakajima Williams-Toyota (B) 1:36.290 + 0.583 35
9. Kovalainen McLaren-Mercedes (B) 1:36.397 + 0.690 40
10. Piquet Renault (B) 1:36.401 + 0.694 35
11. Hamilton McLaren-Mercedes (B) 1:36.515 + 0.808 30
12. Trulli Toyota (B) 1:36.516 + 0.809 34
13. Buemi Toro Rosso-Ferrari (B) 1:36.628 + 0.921 32
14. Glock Toyota (B) 1:36.639 + 0.932 29
15. Alonso Renault (B) 1:36.640 + 0.933 20
16. Sutil Force India-Mercedes (B) 1:36.875 + 1.168 36
17. Kubica BMW-Sauber (B) 1:37.267 + 1.560 38
18. Bourdais Toro Rosso-Ferrari (B) 1:37.278 + 1.571 30
19. Fisichella Force India-Mercedes (B) 1:37.432 + 1.725 27
20. Heidfeld BMW-Sauber (B) 1:37.930 + 2.223 37