Gian Piero Gasperini's side dominated from the outset against their LaLiga opponents and opened the scoring after 16 minutes, Hans Hateboer claiming his first goal in the competition with a close-range finish.
Josip Ilicic doubled their advantage shortly before the interval with a fine strike, before Remo Freuler curled home a third from long distance in the 57th minute.
A rocket from Atalanta doubles their lead 🚀 pic.twitter.com/XgJ2ji5yc4— Bleacher Report Live (@brlive) February 19, 2020
Hateboer then claimed a second five minutes later, and while Denis Cheryshev pulled a goal back for Valencia, the Italian side will be supremely confident of finishing off the job in Spain in three weeks' time.
Atalanta started in blistering fashion and a clean through Mario Pasalic was superbly denied by Jaume Domenech after eight minutes.
There was little the Valencia goalkeeper could do in the 16th minute, however, with Hateboer storming past Jose Gaya to meet Alejandro Gomez's cross and prod his side into a deserved lead from six yards.
That advantage was nearly cancelled out on the half-hour mark when Ferran Torres crashed a powerful effort off Pierluigi Gollini's left-hand post, while Goncalo Guedes fizzed wide from a promising position soon after.
They were punished for those misses three minutes before the interval when Ilicic thundered into the top corner from 18 yards to open his Champions League account.
Any hopes Valencia had of reining in the hosts were extinguished shortly before the hour mark when Freuler's whipped effort from outside the penalty area flew past the helpless Domenech.
Maxi Gomez somehow failed to score from six yards, before Hateboer sprung the offside trap at the other end to latch onto Pasalic's pass and fire past Domenech, who should have done better.
Cheryshev pulled one back for the visitors in the 66th minute – just two minutes after coming off the substitutes' bench – but it did little to detract from a glorious night for Gasperini's men.
What does it mean? Atalanta power past accommodating visitors
Atalanta were utterly ruthless against a Valencia outfit who scarcely knew what had hit them. A place in the last eight looks almost nailed on and they will fancy their chances against any side left in the competition in this form.
If there is a criticism of the Italians, it is that they look vulnerable at the back, as evidenced by the host of chances carved out by Valencia in the closing stages. That will not bother their fans just now, who will be rightly basking in the glow of a truly memorable European night.
Gomez revelling on the big stage
Gomez is enjoying his first taste of Champions League football at the age of 32. He might not have scored, but he was once again at the heart of Atalanta's effervescent attacking play, regularly leading Valencia's defenders on a merry dance.
Valencia's cause not helped by Domenech
He made a wonderful save early on from Pasalic but it was all downhill from there for the Valencia goalkeeper. He got a weak hand to Ilicic's strike and only he can say what he was trying to do with Hateboer's second goal.
Atalanta host Sassuolo in Serie A on Sunday, while Valencia visit Real Sociedad in LaLiga a day earlier.