Malaga struck 10 minutes from time to put Villa on the brink of elimination in the Peace Cup.
The goal, scored by Fernando, was a sucker punch for the Claret and Blue, who just two minutes earlier saw Isaiah Osbourne spurn the best opening of the game.
Martin O'Neill's men must now beat Atlante on Wednesday to stand any chance of progressing to the semi-finals but it could all be over as early as Monday, should the Mexicans fail to beat Malaga.
O'Neill won't have exactly been pleased with the defeat against the Spaniards but he will take many positives out of the match.
Valuable
One plus point was the application showed by some of the Villa youngsters as 21 year-old USA starlet Eric Lichaj performed well in his role at right back for the full 90 minutes.
Wing wizard Marc Albrighton also looked in fine fettle after coming on for the injured Emile Heskey, who sustained concussion after just seven minutes.
O'Neill will undoubtedly be pleased that, Heskey apart, his players have come through a tough test in hot conditions relatively unscathed. He will also be glad to have seen his side gain some valuable pitch time ahead of the new season.
The next test for the Villa boss will be off the pitch as he looks to bring in some much needed reinforcements to help his talented young squad prosper.