The 2-1 victory was much needed by the Etihad Stadium outfit, who had only collected one point from their first two games in the tournament.
Roberto Mancini’s men had to come back from conceding an early goal, as visiting midfielder Cani opened the scoring for the Spanish side after only four minutes.
A Carlos Marchena own goal two minutes before the interval gave City parity, as the former Valencia defender put a Aleksandar Kolarov cross past his own goalkeeper.
Despite a largely unimpressive display by City, substitute Aguero saved the day for the home side, tapping in a Pablo Zabaleta cross from close range to give the Premier League outfit the three points.
City boss Mancini feels the group has been ‘re-opened’ by the result and claims a win was the most important thing.
“I told you before the game it was important only to win this game and we won,” he told Sky Sports.
“I think we deserved to win because we had a lot of chances to score but Villarreal on the counter-attack were very dangerous because they play football very well.
“I think it was an important goal – an important goal because now I think that everything is re-opened, also for the first place (in the group),” the Italian concluded.
The only downside for City was the fact that their fans were guilty of throwing objects at the Villarreal players during set pieces, with the club now likely to face a disciplinary process.
In the other match in Group A, Napoli and Bayern Munich shared the spoils in a 1-1 draw in Italy. Toni Kroos had given the German side the lead early on, before a Holger Basturder own goal levelled things up.
The visitors had a glorious chance to take all three points back to the Allianz Arena, but Mario Gomez missed a second half penalty.
By Gareth McKnight