The club's Carling Cup success over Arsenal at Wembley in February - only their second major honour - ensured Blues qualified for Europe by merit and not invitation for the first time.
And with European football back at St Andrew's after a 50-year absence, Chris Hughton's second-tier side thrived amid a near-capacity crowd in the play-off second leg to take their place in tomorrow's draw.
Following a goalless first leg in Madeira in which Blues hit the woodwork three times, the midlands outfit struck twice in nine first-half minutes to take firm control of the tie.
Inspirational 17-year-old winger Nathan Redmond - a boyhood Blues fan and graduate of City's Academy - broke his duck for the club with a fairytale goal to grace any European tie.
The identity of the second goalscorer was less clear-cut, though, as David Murphy was credited with a near-post header from Jean Beausejour's corner which appeared to have come off Luis Alberto.
Blues could and should have had plenty more and, after man of the match Redmond curled against a post in the second half - on-loan striker Chris Wood added a third in the 86th minute to cue the celebrations which signalled Birmingham had done more than enough.
Hughton made just the one switch from the starting line-up which drew at the Estadio da Madeira, Adam Rooney coming in for the injured Liam Ridgewell.
Opposing boss Ivo Vieira, meanwhile, made a handful of changes and watched his side enjoy their only period of domination in the opening stages.
The visitors' clearest opportunity to strike an early blow came as Curtis Davies misjudged a long goal-kick from Elisson.
Mateus nicked in to nudge the ball past keeper Boaz Myhill on the edge of the box, only to be forced back to Daniel Candeias - who curled wide.
It was certainly against the run of play which Blues opened the scoring in the 15th minute, but it was a goal of pure quality.
Left-back David fed Redmond and the youngster skipped past Alberto before drilling into the bottom corner from 20 yards.
The goal certainly settled Blues and lifted the home support, who were in dreamland soon after.
Beausejour's inswinging corner was met at the near post by a combination of Murphy and Alberto and the ball found the net via the crossbar.
Birmingham were in full swing and Wood was only denied a third by a last-ditch block from Zarko Tomasevic.
Nacional remained a threat in attack but it was Blues who went close to scoring every time they went forward, Chris Burke seeing his effort cleared off the line by Claudemir before Rooney's side-footed volley forced a solid save from Elisson.
Elisson started the second half how he finished the first, saving well from Rooney.
Nacional boss Vieira made three changes with half-hour remaining in a bid to alter matters but it was Blues who continued to create the better openings.
Rooney enjoyed a clear chance to wrap matters up in the 77th minute but, with Wood in acres of space, opted to shoot straight at Elisson.
Redmond then curled against the far post before Wood, who had minutes earlier seen his attempted chip saved by Elisson, rounded off a memorable night from close range following a swift counter.