Recent British media reports have suggested Chelsea coach Rafa Benitez wants to take Villa on loan until the end of the season to join fellow Spaniard Fernando Torres in the Premier League side's forward line.
"I don't know if the possibility exists, I don't think so," Iniesta was quoted as saying in Spanish media. "Personally I wouldn't like it because Villa is a fundamental player (for Barca)," the midfielder added.
Villa returned to action at the start of the season after breaking his leg at the Club World Club last December but has not featured regularly under new Barca coach Tito Vilanova.
The 31-year-old, Spain's record scorer, has only started six of 17 matches in La Liga and one of six in the Champions League, scoring just five goals in total, all in the Spanish league.
He joined Barca from Valencia at the end of the 2009-10 campaign and helped them win La Liga and the Champions League in his first season, scoring Barca's third goal in a 3-1 success against Manchester United in the final at Wembley. (Reporting by Iain Rogers, editing by Greg Stutchbury)