Max Verstappen ended the session second despite battling balance issues in the Red Bull, with Charles Leclerc rounding out the top three for Ferrari.
Poor surface conditions on F1's return to Istanbul Park last year provided a fastest lap time of one minute 28.3secs but any fears over a repeat this year were allayed early on as drivers instantly posted one minute 27 second lap times.
As the track evolved those times tumbled dramatically, with Hamilton eventually setting the fastest time of the session with a 1:24.178s, although confirmation of his penalty came midway through the session.
Title rival Verstappen was 0.425secs slower in second, ahead of Leclerc. The second Mercedes of Valtteri Bottas finished six-tenths adrift of team-mate Hamilton in fourth.
Carlos Sainz finished fifth but will take a back-of-the-grid penalty for a complete PU change, ahead of Esteban Ocon.
Lando Norris was the fastest McLaren in seventh ahead of AlphaTauri's Pierre Gasly whilst Fernando Alonso confirmed Alpine's pace in ninth on the medium tyres, half a second down on Ocon.
Sergio Perez finished 10th and echoed team-mate Verstappen's concerns over understeer in the Red Bull, with the team hoping to capitalise on Hamilton's penalty this weekend whilst sporting a livery paying homage to power unit supplier Honda.