Chaves attacked for the line with just over two kilometres left on the 200.3km ride from Cordoba to Sierra de Cazorla to take victory from Ireland’s Dan Martin and overnight leader Tom Dumoulin of the Netherlands in a time of 4hr 46min 16sec.
The Orica-GreenEdge rider now holds a 10 second advantage over Dumoulin with Martin 33 seconds back in third.
Chris Froome and the Movistar duo of Nairo Quintana and Alejandro Valverde all finished with the same time 11 seconds back.
Froome, who is aiming to become just the third man to win the Tour de France and the Vuelta in the same year, is now 55 seconds behind Chaves in seventh.
Valverde remains fifth, 49 seconds back, with Quintana in ninth a further eight seconds behind.
“We have already done big things in winning two stages,” said Chaves when asked if he could rival the likes of Froome and Quintana for the overall victory.
“We need to enjoy this moment and have our feet on the ground. There are still a lot of stages to go and very tough stages at that.
“I need to thank the team who have done incredible work. All the team are having a great tour. Yesterday, Caleb (Ewan) won too so we are all very happy in the team.”
Chaves, 25, had claimed his first Grand Tour victory on Sunday’s second stage and held the leader’s red jersey until Wednesday when Dumoulin edged ahead by a second.
However, his desire to recoup the lead was clear to see as he left the race favourites in his wake on the tough category three climb to the finish.
After a fast-paced opening 75km a breakaway group of six was eventually formed, but they were never allowed to gain much ground on the peloton with their biggest lead restricted to under five minutes.
Britain’s Steve Cummings then tried to replicate his victory on stage 14 of the Tour de France earlier this year as he attacked on his own with 11km to go.
Yet, Cummings didn’t have the legs for the final steep climb to the finish and was easily caught by Chaves as he sped away from the chasing pack to victory.
Dumoulin tried to respond to maintain the red jersey, but could only manage third as he was passed by Martin in the final few metres.
Friday’s 191.1km seventh stage from Jodar to La Aplujarra could also provoke significant changes in the general classification with a category one climb to the finish. – Agence France-Presse