The 23-year-old Chile international will join the United Arab Emirates club from Audax Italiano after his year-long loan with Blackburn ends very shortly.
"Villanueva is an exciting young player with superb technical skills," Khalid Hamid, a member of Shabab's interim management committee, told The National newspaper.
"He was the best player in Chile before his move to Blackburn, where he has not been given the opportunities he deserved.
"He was probably encouraged by his countryman Jorge Valdivia (Al Ain's attacking midfielder) to accept the offer.
"The chance of working with coach Toninho Cerezo also convinced him to take up the offer."