BMC's Gilbert reeled in an attack by Ireland's Nicolas Roche (Ag2R-La Mondiale) under the red kite, shrugged off Britain's Ben Swift (Team Sky) and Germany's John Degenkolb (Argos-Shimano), and then galloped to a trademark uphill sprint victory at La Lastrilla on the outskirts of Segovia to underline his credentials ahead of the forthcoming world championships in Limburg.
The intriguing battle for the red jersey took yet another interesting twist when Valverde (Movistar) finished with gusto to take second place and eight bonus seconds.
Valverde finished three seconds ahead of race leader Alberto Contador (Saxo Bank-Tinkoff) and also took a six-second time bonus in the second intermediate sprint to reduce his deficit to one minute and 35 seconds on GC ahead of Saturday's mountainous showdown in the race's penultimate stage.
Nicknamed 'The Green Bullet', Valverde also moved within three points of Joaquim Rodriguez in the battle for the green jersey.
Katusha pair Daniel Moreno and former race leader Rodriguez took third and fourth on the rolling 183km stage, with Belgian Gianni Meersman (Lotto Belisol) completing the top five after a compelling finale to what was otherwise a rather dull ride through the parched plains of central Spain.
It was Gilbert's second win in the Vuelta and the victory was thanks in large part to his Italian team-mate Alessandro Ballan, who helped chase down Roche before setting up Gilbert to take the spoils.
"My BMC team - especially Alessandro Ballan and Klaas Lodewych - did a great job today," said the 32-year-old after what was incredibly only his second win of the season. "Ballan could have won this stage for himself but instead he worked for me."
Already victorious in Barcelona on stage nine, Gilbert said he was on track for his big target - the world championship road race in the Netherlands on September 23.
"For sprinters, this race is too hard to prepare for the world championship but for me it is perfect," he added.
"I don't know if my condition is better now or in Barcelona, it has been a hard Vuelta with a lot of transfers.
"But this is just the build-up I need."
A two-man break featuring Aitor Galdos (Caja Rural) and Jose Vincente Toribio (Andalucia) broke clear of the peloton inside the opening kilometre of the race. The Spanish duo carved out a maximum lead of 10:17 on a day that saw the first showers of rain during the 67th edition of the Vuelta.
Galdos and Toribio were swept up by the peloton with just over 27 kilometres remaining.
Movistar took over the reins on the front of the peloton, setting up their man Valverde for the second intermediate sprint 11km from the finish, and then bringing about a split in the peloton as the fast pace took its toll on the weary legs of many riders.
With 3km remaining, Spaniard Egoitz Garcia (Cofidis) blasted clear of the pack and forced a reaction from five riders - including Roche, Degenkolb and Matti Breschel of Rabobank.
Through Ballan, BMC drove the pace on the chasing peloton as Roche gave it one last throw of the dice inside the final kilometre.
Degenkolb tried to bridge the gap but the four-time stage winner seemed to have a problem with his chain and was swept up on the final rise to the finish line.
Gilbert made his move around 500 metres from the finish, initially taking Swift on his wheel. The Team Sky rider struggled to hold the pace of the former Belgian national champion and faded in the last few hundred metres to leave the road clear for Gilbert to take the win.
Valverde finished impressively while Rodriguez did not have the strength to take the final bonus seconds for third place, which instead went to his team-mate Moreno.
Contador finished in 11th place inside the chasing pack, three seconds down on Gilbert and his GC rivals, and lost a total of 17 seconds to Valverde.
"I hope I'm not wrong, but I don't think it'll be important," said the Spaniard.
Contador leads Valverde by 1:35 and Rodriguez by 2:21 ahead of Saturday's 171km 'queen stage' which features four major climbs ahead of the arduous final ascent to Bola del Mundo.
Saxo Bank-Tinkoff leader Contador, who lives near Saturday's finish and trains regularly in the area, said he did not know the final climb well because it was "too hard, normally I avoid it.
"I'm sure they'll attack me from the gun, I'll have to be careful."
The Vuelta a Espana finishes on Sunday with a processional stage into Madrid.