Garcia was out to prove a point at Ford Center at The Star, Texas, following his unanimous decision loss to Errol Spence Jr in March 2019.
The 32-year-old elected to stay at welterweight after his first career defeat and bounced back with a points win, having put Vargas on the canvas in the fifth.
The three judges scored it 114-113, 116-111 and 116-111 in Garcia's favour and the four-weight world champion has stated a desire to stay at 147lbs.
He hinted at a possible rematch with Spence Jr or a potential bout with Pacquiao for his next trip to the ring.
When asked about a meeting with Pacquiao, Garcia said: 'I think it's very likely that we are considered as likely opponents.
'I'm ready to get back in with the best.
'I would love to get a potential fight with Manny Pacquiao, or a rematch with Errol Spence. I think it would be a tremendous fight.'