Spinner Stephen Parry and Jimmy Anderson took three wickets each as Essex were skittled out for 159 before an early tea was taken on the second day of the Specsavers County Championship match at Chelmsford.
However, Lancashire declined to enforce the follow-on despite leaving Essex 160 runs adrift of their first-innings total.
Parry broke the back of the Essex batting either side of lunch when he removed Dan Lawrence and Adam Wheater and finished with three for 28. Anderson took three for 56.
Only Ravi Bopara offered any significant resistance, but once he went Essex collapsed with the last three wickets going down for a dozen runs in nine overs.
Parry just six balls after lunch to send Wheater back to the pavilion, pinned lbw on his back-foot for one.
Bopara had been becalmed before lunch, taking 53 balls over his first 11 runs. But he broke loose of his moorings, smashing Kyle Jarvis for two boundaries through the off-side in one over, and then leant back and cut Anderson for another four.
Ryan ten Doeschate was the sleeping partner in a seventh-wicket stand of 48 in 16 overs until Bopara got to a ball from Anderson a fraction too early and clipped it to Parry at midwicket. His 46 encompassed 112 balls and including seven fours.
Ryan McLaren replaced Anderson at the Hayes Close End and first ball Simon Harmer was plumb lbw. Next over McLaren had ten Doeschate waving at one outside off-stump to give Alex Davies his fifth catch. The innings ended when Parry took his third wicket, trapping Jamie Porter leg before.