Wiggins finished third, 19 seconds behind the Movistar rider, and on the wheel of his Sky team-mate Chris Froome.
Wiggins still holds a lead of two minutes and five seconds on GC over Froome, who paced the maillot jaune up the final climb and laid aside his own ambitions for the stage victory.
Third-placed Vincenzo Nibali lost 18 seconds on the final climb and is now 2:41 behind Wiggins. Nibali had put the leaders under some early pressure after attacking on the descent of the Cat.1 Col de Mente just over 100km from the finish - but the Italian decided to drop back into the peloton after a heated discussion with Valverde in the leading group.
The 143.5km 17th stage concluded with a 15.4km ascent of the Col du Peyresourde at an average gradient of 5.1 percent, coming right after the descent from the HC Port de Bales climb, and was considered the last chance to deny Wiggins the yellow jersey.
"At that point, for the first time I thought: I'd just won the Tour. It was incredible," said Wiggins when recalling his emotions approaching the finish in Peyragudes.
Friday’s flat stage is followed by a 53.5km time trial to Chartres, where Wiggins is expected to extend his advantage before the three-week race finishes in Paris on Sunday.
Valverde’s win was his first in the Tour following a two-year ban for doping and a fifth victory of his comeback season.
“I’m absolutely delighted with the win,” said 32-year-old Valverde, who now has four career stage wins in the Tour. “I couldn’t believe it when I was alone and the script today gave me much joy. I’m so pleased the team finally got a victory after all the effort we have put in.”
The Spaniard made his decisive move on the Port de Bales climb, attacking from the fragmented leading group to cross the summit 30km from the finish in pole position, 2:20 ahead of the main yellow jersey group.
With all 16 remaining riders of the initial break caught by the main pack by the time the final climb had started, Valverde rode alone in pursuit of glory as a string of attacks further down the hill blew the chasing group to pieces.
Defending champion Cadel Evans (BMC) was one of the first riders to be dropped by the yellow jersey group, which was being led by Ivan Basso, the Liquigas team-mate of Nibali.
Belgians Jurgen van den Broeck and Jelle Vanendert of Lotto Belisol both put in large digs on the front of the main group, while a strong attack by Frenchman Thibalt Pinot (FDJ-BigMat) saw Nibali distanced from the leaders.
But once again it was Team Sky duo Wiggins and Froome who emerged strongest – and entering the final 4km the top two riders in this year’s GC pulled ahead of all their rivals.
Froome, looking very much the stronger of the two, kept on checking his speed and looking over his shoulder to encourage the yellow jersey. Rather than pressing on to contest Valverde for the stage victory, Froome chose to work for his team leader. The pair slowed and were almost caught by Pinot by the time they crossed the line 19 seconds down on Valverde.
“We were not here today to win the stage today - our focus was to protect the yellow jersey,” Froome said after Sky consolidated their stranglehold at the top of the standings. “I wouldn’t say anything was definite yet,” he added. “I’d rather finish things off before we start talking about the overall win.”
Wiggins was quick to thank Froome for another selfless display in the mountains. "He's been a fantastic team-mate during this Tour de France. For sure, one day, he'll win the Tour and I'll be there beside him to do it," he said.
American Tejay van Garderen (BMC) rose to fifth in the GC after Spaniard Haimar Zubeldia (RadioShack) struggled on the final climb of the day. White jersey Van Garderen’s team-mate Evans rises to sixth place despite finishing 2:10 behind Valverde. The Australian is almost 10 minutes behind rival Wiggins after a second successive testing day in the Pyrenees.
Double stage winner Thomas Voeckler (Europcar) of France secured the polka dot jersey by taking maximum points over the first three climbs of the day ahead of rival Frederik Kessiakoff of Astana. Voeckler now has an unassailable 11-point lead over the Swede in the king of the mountains standings.
Slovak youngster Peter Sagan (Liquigas) finished the stage safely to retain the green jersey on his debut Tour. Sagan holds a 102-point lead over Germany’s Andre Greipel (Lotto Belisol) and will enter Paris in green barring any mishap.
Friday’s 222.5km stage 18 from Blagnac to Brive-la-Gaillarde includes four minor climbs but could well be decided by a bunch sprint on the eve of the race’s final time trial.