Striker Vardy stunned the hosts with a second-half goal – his first in 748 minutes – as the Foxes fell to a gutsy 2-1 last-16 defeat in Spain.
It came after Schmeichel had saved an early Joaquin Correa penalty and gave Claudio Ranieri’s side a crucial away goal after they were outplayed by the hosts in the first leg.
Pablo Sarabia and Correa had put Sevilla into a deserved lead but Vardy’s first European goal put a completely different complexion on next month’s second leg at the King Power Stadium.
But for Schmeichel’s first-half heroics Leicester would have been out of the tie before half-time with Sevilla’s lead failing to reflect their utter dominance.
The Dane pulled off a string of saves as the Foxes survived a first-half onslaught but hung on to set up a winner-takes-all showdown on 14 March.
Sevilla, looking to reach the Champions League quarter-finals for the first time since 1958, signalled their early intent as Sarabia shot over while Christian Fuchs sparked panic when his header almost caught out Schmeichel.
Schmeichel was the sole piece of resistance as he bailed the Foxes out constantly during the first half – starting with a 15th-minute penalty save.
It all stemmed from poor defending as Robert Huth failed to clear before Wes Morgan chopped down Correra as he went to shoot. It was a clear penalty but Correra’s tame spot-kick was easily stopped by Schmeichel.
The miss failed to dampen Sevilla’s desire to bury Leicester early and Sergio Escudero was the next to be denied by Schmeichel – before they finally beat the Dane after 25 minutes. Escudero’s delicious cross did the damage as Sarabia rose above the hapless Fuchs to plant a brilliant header in off the far post.
Schmeichel stopped Correa from making it 2-0 with another low stop nine minutes before the break as Leicester survived further first-half trouble as Vitolo headed over in added time.
Ranieri won the Copa del Rey with Valencia in Sevilla in 1999 but he had little to cheer as Vitolo almost made it 2-0 five minutes after the break when his shot from the tightest of angles brushed the face of the post.
It came after Wilfred Ndidi had at least tested underemployed Sevilla goalkeeper Sergio Rico before Correa made up for his penalty miss after 62 minutes. Again it was too easy as Stevan Jovetic was allowed to bully his way onto a bouncing ball in the box and he slipped in Correa to fire in off the bar from six yards.
The hosts went looking for a third but were stunned when Vardy struck with 17 minutes left. Demarai Gray and Danny Drinkwater combined on the left for Drinkwater to break free and cross for Vardy to convert his first goal since 10 December from close range.
The hosts were rattled but Schmeichel still needed to save from Vitolo with seven minutes left and Adil Rami hit the bar late on.