The 23-year-old has joined Los Che on a temporary deal, but will have the option to move to Mestalla on a permanent basis if he is successful during the forthcoming campaign
Los Che agreed to pay the Italian giants €700,000 for the deal, and hold the option to buy the player at any time during the upcoming season for an undetermined fee.
Vila, who impressed for Espanyol before being sold to the San Siro outfit in January 2011, is viewed as a replacement for Jordi Alba, who signed for Barcelona for €14 million earlier this summer.
But while Mauricio Pellegrino's side have the option to buy the 23-year-old outright, they have been warned by Milan that they will only secure his services permanently if they make a satisfactory offer, reported to be in the region of €5m.
"We will only sell for what the player is worth," CEO Adriano Galliani stated.
Valencia kick off their Liga season away to Real Madrid on the weekend of August 18.