Barrenechea arrives on loan from Villa, for a fee of three million euros (£2.6m). However, there is a 12 million euro purchase clause, which will be triggered at the end of the season, in June 2026.
The player is expected to sign a contract valid for five seasons after that, as reported by Flashscore in Portugal.
Villa will also be entitled to receive a 30% share of the value of any capital gain made in a future transfer of Barrenechea, capped at a maximum of 10 million euros.
After the departure of Orkun Kokcu to Besiktas and the end of Renato Sanches' loan, who has returned to PSG, Benfica are beginning to reshape their midfield.
For the middle of the pitch, Bruno Lage has Florentino Luis, Leandro Barreiro and Fredrik Aursnes, as well as Manu Silva, who is still recovering from injury.
Last season, Barrenechea made 32 appearances for Valencia, scoring one goal and providing two assists, on loan from Villa, who had signed him from Juventus last summer for eight million euros.
Barrenechea was developed at Newell's Old Boys and had spells at Sion in Switzerland and Frosinone in Italy.