Villarreal edged into the Champions League semi-finals on the away goals rule thanks to Rodolfo Arruabarrena's flicked header on 58 minutes.
Rodolfo Arruabarrena heads Villarreal's winning goal
Juan Roman Riquelme's deft lob from a free-kick found the unmarked defender who rose to head home.
The home side dominated throughout and could have finished the tie earlier with the exquisite Riquelme and the dangerous Diego Forlan going close.
A disjointed Inter pressed late on but failed to trouble Villarreal's defence.
With Villarreal lying eighth in La Liga, the Spaniards kept alive their only realistic chance of qualifying for next year's competition.
But Inter, who won the first leg 2-1, crashed out at the quarter-final stage for the second year running.
Both sides started brightly with some slick passing in midfield, but struggled to find the killer pass to unlock the opposing defence.
Villarreal's best chance fell to Jose Mari who rose to meet Javi Venta's cross, only for the referee to halt play for Mari's push on Marco Materazzi.
The home side's neat passing and superior possession began to frustrate the Italians who found it difficult to find their rhythm.
As the half progressed, Riquelme began to see more of the ball and his trickery and sublime skill caused problems for the Inter defence.
But for all Villarreal's build-up play, a tame Arruabarrena header and two long shots from Marcos Senna were all the home fans had to cheer.
As the players headed for the tunnel at half-time, Juan Sebastian Veron had a few choice words for Argentine compatriot Juan Pablo Sorin who were both engaged in a first-half feud.
Soon after the restart Senna squared for Jose Mari who blasted his side-foot shot over the Inter bar from the edge of the box, while Riquelme's drive from distance tested Francesco Toldo.
The home side's dominance was rewarded 13 minutes into the second period thanks to defender Arruabarrena's bravery and awareness.
Riquleme floated in a free-kick which the unmarked Arruabarrena managed to get the slightest of touches on to head Villarreal ahead.
Forlan then forced an acrobatic save from Toldo as the Spaniards, led by Riquelme's mastery, looked to kill off the tie.
Former Everton defender Matterazi was lucky to stay on the pitch after his savage elbow felled Sorin and left the Argentine requiring treatment to a serious gash on his face.
Riquelme's quick thinking and acute awareness almost caught out Toldo 10 minutes from time when he drove in a strike from a tight angle that the Italian keeper did well to claw out.
It would have been no less than the Argentine deserved after a scintillating performance in the Villarreal midfield.
Stankovic stung the hands of Sebastian Viera late on but the Italians never threatened the home keeper.
Villarreal will now face the winners from Arsenal's tie with Juventus on Wednesday.
Villarreal midfielder Alessio Tacchinardi:
"We showed heart and soul and a greater desire to reach the semis.
"I'm proud to be part of this group. I had lost some of my motivation at Juventus and I've rediscovered it in Spain."
"Out of Juventus and Arsenal, I'd prefer to meet Arsenal in the semi-finals. It would be tough for me to face my former team-mates."
Inter Milan coach Roberto Mancini on his side's defending for the goal:
"It was stupid. It changed the entire match and meant that from a position of control, we had to come out and attack.
"That played into Villarreal's hands and they were able to enjoy more space."
Villarreal: Viera, Javi Venta, Quique Alvarez, Pena, Arruabarrena, Senna, Tacchinardi, Sorin (Josico 78), Riquelme, Forlan (Calleja 90), Jose Mari (Franco 78).
Subs Not Used: Barbosa, Arzo, Roger, Santi Cazorla.
Booked: Tacchinardi, Viera.
Goals: Arruabarrena 58.
Inter Milan: Toldo, Cordoba, Materazzi, Samuel, Javier Zanetti, Figo (Mihajlovic 75), Cambiasso, Veron (Cruz 89), Stankovic, Recoba (Martins 56), Adriano.
Subs Not Used: Julio Cesar, Burdisso, Pizarro, Gonzalez.
Booked: Figo, Martins.
Agg (2-2) Villarreal win on away goals rule
Ref: Kyros Vassaras (Greece)