Arredondo, 25, had been part of a breakaway and made his move with just under four kilometres left to the summit finish in Rifugio Panarotta.
The Colombian had time to raise one arm into the air as he crossed the finish line, 17 seconds ahead of Fabio Duarte. Philip Deignan was 20 seconds further back at the end of the 171km leg from Belluno.
“It’s a win that I’ve really searched for,” Arredondo said. “I said it from the start, I’m in this Giro to win at least one stage. Until today, I managed three second places and two third places, I was only missing a win and we got that today.”
Quintana remained 1min 41sec ahead of fellow Colombian Rigoberto Uran, with Pierre Rolland moving into third place as Cadel Evans slipped to ninth.
Rolland is 3:29 behind Quintana, two seconds ahead of Fabio Aru and Rafal Majka. “Today was a calm climb, but there were several attacks, I managed to control all of them which concerned my position,” Quintana said. “Each cyclist should worry about their own race.”
A group of 11 cyclists escaped on the first categorised climb of the day, up San Pellegrino, and they managed to open up an advantage of 1:50 on the approach to the steepest part of the climb, which had gradients of 15 per cent. Arredondo, who currently leads the King of the Mountains standings, attacked three kilometers from the summit to pick up maximum points.
Team Sky’s Irish rider Deignan was just behind Arredondo, with Cataldo 40 seconds slower, but the breakaway was back together on the descent and three more riders joined it from the peloton.
The peloton hit the top of San Pellegrino four minutes behind Arredondo and the gap grew to twice that, with the favourites opting to conserve their energy.
The leaders maintained a significant advantage on the second climb – the Passo del Redebus – and had a 7:27 gap on the final climb of the day.
Thomas De Gendt attacked at the foot of the ascent, with 16km remaining, but the Belgian was caught and passed by Arredondo, Duarte and Deignan with six kilometres to go.
Back in the overall contenders’ group, Rolland made his move with just over two kilometers remaining to move into a podium position, while Aru also gained time on Quintana with a final surge to the line.