The former Blues midfielder is relishing the prospect of reaching the Champions League final but is aware of how dangerous Jose Mourinho's men can be
The Rojiblancos were held to a 0-0 draw by the Blues at the Vicente Calderon last week as they pursue their first Champions League or European Cup triumph.
Tiago, who spent a single season at Stamford Bridge in 2004-05, does not think the team's lack of experience in the latter stages of the competition harms their chances of progression but accepts the visitors will have to eradicate any mistakes to make the final in Lisbon against Real Madrid.
"The teams know each other very well," the 32-year-old told reporters. "We know Chelsea are a team who expect the opponents to make a mistake, and they will take advantage of that.
"But we need to exploit our own qualities. We'll try to win the game and focus on how well we play.
"We are experienced. We haven't been in the Champions League for a few years, that's true, but we're feeling confident. I look at my team-mates and I have full confidence in them all. I see a team fully capable and ready to take on any team."
Tiago admits it would be a dream to play in the Champions League showpiece at the end of a season which could also see them land the La Liga title.
"We're not thinking about mistakes. We're thinking about doing things well," the Portuguese added. "This is a great opportunity to get to a final, which is every player's dream.
"We know it'll be very difficult because Chelsea don't leave any spaces, but we need to find a solution for that. We know Chelsea will start strongly. They're well organised and will try to take advantage of set pieces.
"We'll have to do the same, and take advantage of the possession we have. We have similar virtues to them, and we'll just try to prove stronger in the end. We'll just try to play as well as we can and tap into our own qualities."