Nico Rosberg is aiming to score his second pole position of the season. (AP Photo)
Rosberg clocked a best lap of 1min 15.159sec to outpace nearest rival Brazilian Felipe Massa of
Ferrari by 0.038sec on a near-perfect day of blue skies and sunshine in the Mediterranean principality.
Defending double world champion Sebastian Vettel of Germany was third fastest for Red Bull, the team having made some improvements following a disappointing run on Thursday.
Two-time champion Fernando Alonso was fourth fastest in the second Ferrari ahead of Frenchman Romain Grosjean in the leading Lotus.
Briton Jenson Button was sixth in his McLaren, the 2009 champion edging ahead of his team-mate and compatriot 2008 champion Lewis Hamilton, who was eighth for Mercedes.
Mexican Sergio Perez of Sauber was ninth and Australian Mark Webber 10th for Red Bull with Finn Kimi Raikkonen down in 12th place in the second Lotus.
The session was intense and competitive and littered with minor incidents until two bigger crashes in the final moments saw it brought to a premature red-flagged conclusion.
In the first of these Briton Paul Di Resta lost control of his Force India car at the exit of the tunnel and after an attempted recovery hit the barriers and badly damaged the nose of his car.
Then, just moments later, Latin American hero Pastor Maldonado collided heavily with the barriers in Casino Square and smashed the right rear wheel off his Williams car.
It left debris flying and ended the session, also curtailing the hopes of Maldonado, who only two weeks ago became the first Venezuelan to win a Formula One race when he triumphed in style at the Spanish Grand Prix.
The incident also left the Williams team with plenty of repairs to complete before Saturday's qualifying session ahead of Sunday's 70th anniversary race round the twisting old street circuit.