Villarreal's La Liga debut started with a match against reigning European champions Real Madrid at the Santiago Bernabéu Stadium on 31 August 1998 where they lost 4-1 despite taking the lead after 3 minutes. The first home game was against Celta de Vigo[5] the week after. Because of a difficult season, Villarreal were relegated to the Segunda División for the 1999–2000 season, but by finishing third, they were then promoted back to the Primera División.
After finishing seventh on their return to the Primera, Villarreal finished in 15th place for two-straight seasons. Villarreal competed in the UEFA Intertoto Cup in the middle of 2002, defeating FH of Iceland, Torino of Italy, and Troyes of France. They lost in the final to compatriots Málaga, 2–1 on aggregate.
In the middle of 2003, they defeated the Dutch team Heerenveen in the final of the Intertoto Cup, thereby qualifying for the UEFA Cup. In their major European debut, Villarreal reached the semi-finals of the UEFA Cup, losing to neighbours and eventual champions Valencia. In the league, Villarreal finished in eighth place. In the middle of 2004, Villarreal retained the Intertoto Cup, beating compatriots Atlético Madrid on penalties after the final finished 2–2 on aggregate. This qualified them to the UEFA Cup. They lost in the quarter-finals of the 2004–05 UEFA Cup to Dutch side AZ, losing 3–2 on aggregate. During the same season, Villarreal finished in third place in La Liga, earning the club their first direct qualification to a European tournament, the Champions League. The club's centre-forward Diego Forlán won the Pichichi Trophy for top scorer in the league, with 25 goals.
Villarreal defeated the English Premier League's Everton in a play-off for the Champions League group stages. The group saw Villarreal go undefeated, drawing both games against Manchester United and achieving a draw and a win each against Lille of France and Benfica of Portugal. The win over Benfica was away and both teams advanced to the last 16.
The club then drew 3–3 against Rangers of Scotland in the Last 16, advancing on away goals due to a 2–2 draw at Ibrox. In the quarter-finals, Villarreal beat Internazionale on away goals after finishing 2–2 on aggregate. The club bowed out in the semi-finals against Arsenal, losing 1–0 away at Highbury. Juan Román Riquelme had a penalty saved by Jens Lehmann in the home game, which finished 0–0. Arsenal went on to lose in the final in Paris to another Spanish club, Barcelona. Villarreal finished seventh in La Liga, which only earned an Intertoto Cup position.
Villarreal contested the Intertoto Cup in the middle of 2006 and was knocked out in its first game, to Maribor of Slovenia. The first leg was lost 2–1 at home and the away game was a 1–1 draw.[9] The team finished 5th in La Liga and qualified for the UEFA Cup. Villarreal gained their best-ever league position in 2008, finishing second to Real Madrid by eight points, and also reached the last 32 in that season's UEFA Cup. After defeating BATE Borisov of Belarus in a play-off, the team won Group C unbeaten. Their group opponents were Fiorentina of Italy, Mladá Boleslav of Czech Republic, IF Elfsborg of Sweden, and AEK Athens of Greece.
In the last 32, Villarreal were defeated by eventual champions Zenit Saint Petersburg, losing the first leg 1–0 in Russia to a Pavel Pogrebnyak goal. The second leg was won 2–1 by Villarreal at El Madrigal, but Zenit advanced on away goals.
The club automatically qualified for the 2008-09 UEFA Champions League, due to them finishing second in La Liga the previous season. They drew Manchester United, for the second consecutive campaign, Celtic, and Aalborg BK. They made a good start by holding current European champions Manchester United to a goal-less draw at Old Trafford, a third 0–0 draw in a row against the English giants. A first win was sealed on 30 September by beating Gordon Strachan's Celtic 1–0 at El Madrigal, courtesy of a Marcos Senna free-kick. On 21 October, during a Champions League match against Aalborg, they scored six goals to three. The Spaniards went through to the knock-out stage after drawing 2–2 with Aalborg in Denmark and drawing goalless once again against Manchester United. In the last group-stage match, they lost to an already-eliminated Celtic.
In the knock-out stage, they faced Panathinaikos, who left Villarreal with a 1–1 away advantage, despite this the Greeks were to lose 1–2 in Athens. Villarreal reached the quarter-finals for the second time in two tries, and were once again paired with Arsenal. The first leg saw a 1–1 draw by a free-kick by Marcos Senna, equalised by an Emmanuel Adebayor volley. Theo Walcott, Emmanuel Adebayor, and Robin van Persie secured a 3–0 win for Arsenal on the return, knocking Villarreal out of the tournament.
Despite finishing outside of a European qualifying spot in the domestic league, Villarreal was given a place in the qualifying round of the 2010–11 Europa League after UEFA determined that Mallorca's financial irregularities precluded them from taking part in the tournament.
A 5–0 home win and a 2–1 away win against Dnepr Mogilev qualified them for the group stage. Villarreal suffered an early setback following a shock 2–0 loss in their away fixture against Dinamo Zagreb. Despite this, however, later wins against Dinamo, Club Brugge and PAOK saw them top their group.
After beating Napoli, Bayer Leverkusen and Twente in the knockout phases, Villarreal qualified for the semi-finals to face tournament favourites Porto. After Villareal took a 0–1 lead at the Estádio do Dragão, Porto made a remarkable turnaround that ended in a 5–1 defeat for Villarreal. Although Villarreal won the second leg with a 3–2 win, Porto's first leg goal total saw them advance to the final on aggregate, where they beat Braga to be crowned champions. Giuseppe Rossi finished as the tournament's second top goalscorer with 11 goals, behind Porto's Radamel Falcao.