Playing at their La Rosaleda home, Malaga took the spoils when Fernando tapped home in the 79th minute after Villa goalkeeper Brad Friedel had pushed out a low cross from Jose Juan Luque.
That goal came just a minute after Isaiah Osbourne had blazed a left-footed shot over the bar when well-placed inside the area, although it was Malaga who the better efforts in the match.
Villa suffered an early setback when they lost Emile Heskey inside the opening six minutes following a clash of heads with Malaga defender Weligton, with Marc Albrighton taking the England striker’s place.
Villa were then indebted to Friedel for keeping them on level terms, with the American producing fine saves to deny Oscar and David Gonzalez either side of half-time.
At the other end, Villa’s Spanish defender Carlos Cueller headed a decent chance over following a corner in the second half, but it was Fernando who had the final say as his strike put Malaga top of Group C.
Malaga can now book their place in the semi-finals of the Peace Cup when they play Atlante on Monday, while Villa will need the Spanish outfit to slip up in that match if they are to have any chance of making the last four when they face Atlante on Wednesday.
In Saturday night’s other Peace Cup match in Huelva, Lyon and Besiktas shared a 1-1 draw in the tough-looking Group D which also includes Porto.