In another strong hint that the champion team will face tougher opposition this weekend than of late, Hamilton not only set the outright pace with a 1m38.673s, but was also very positive about tyre life over later long runs.
The runaway world championship leader, chasing a fourth consecutive Formula 1 race win this weekend, waited much longer than anyone else to move to super-soft tyres, jumping to second when he did so.
That denied Mercedes a one-two, with Vettel edging Nico Rosberg by 0.016s.
Mark Webber had been Hamilton's main rival early on, as the pair swapped first place several times. The second Red Bull ended up back in fourth, but was within 0.063s of its sister car.
The second Lotus of Kimi Raikkonen got straight back out after its morning crash and went eighth.
Despite a cockpit niggle, Jenson Button was ninth for McLaren, ahead of very-closely matched Force India duo Adrian Sutil and Paul di Resta, who were just 0.001s apart.
No one repeated Raikkonen's trip into the wall, but both Caterham's Charles Pic and Sauber's Esteban Gutierrez had spins during the afternoon while Alonso visited the grass on his final lap.
2nd Free Practice Session from the Formula One Korean Grand Prix at Korean International Circuit on Friday
1. Lewis Hamilton (Britain) Mercedes 1:38.673
2. Sebastian Vettel (Germany) RedBull - Renault 1:38.781
3. Nico Rosberg (Germany) Mercedes 1:38.797
4. Mark Webber (Australia) RedBull - Renault 1:38.844
5. Felipe Massa (Brazil) Ferrari 1:39.114
6. Romain Grosjean (France) Lotus - Renault 1:39.226
7. Fernando Alonso (Spain) Ferrari 1:39.444
8. Kimi Raikkonen (Finland) Lotus - Renault 1:39.757
9. Jenson Button (Britain) McLaren 1:39.774
10. Adrian Sutil (Germany) Force India - Mercedes 1:40.006
11. Paul Di Resta (Britain) Force India - Mercedes 1:40.007
12. Sergio Perez (Mexico) McLaren 1:40.152
13. Esteban Gutierrez (Mexico) Sauber - Ferrari 1:40.186
14. Nico Huelkenberg (Germany) Sauber - Ferrari 1:40.210
15. Jean-Eric Vergne (France) Toro Rosso - Ferrari 1:40.446
16. Daniel Ricciardo (Australia) Toro Rosso - Ferrari 1:40.552
17. Pastor Maldonado (Venezuela) Williams - Renault 1:41.117
18. Valtteri Bottas (Finland) Williams - Renault 1:41.289
19. Giedo van der Garde (Netherlands) Caterham - Renault 1:42.461
20. Charles Pic (France) Caterham - Renault 1:42.798
21. Jules Bianchi (France) Marussia - Cosworth 1:43.108
22. Max Chilton (Britain) Marussia - Cosworth 1:43.441