McDowell topped his group at Finca Cortesin when he followed up his win over Open Champion Louis Oosthuizen with a last green victory against Venezuela's Jhonattan Vegas.
His Ryder Cup partner McIlroy would have avoided him - at least for the time being - if he had defeated Nicolas Colsaerts and topped his section.
But by losing 3 and 2 to the Belgian the 28 year old, he goes instantly into a clash with McDowell.
They are ranked fifth and sixth in the Official World Golf Ranking, but McDowell, the higher of the two, said: "He beats me every time we play together.
"But this is the Northern Ireland match play championship and I'm hoping it's going to be different. It's the Volvo World Match Play and the pressure is on.
"I am sure he will expect to beat me, but it will be a great game and I am excited about it.
"He is a fabulous player, so talented. This course is all about driving the ball and he is pretty good at that.
"It's hard to play against a close friend, but you've got to leave your friendship on the sidelines.
"I stopped playing him because he's too good. I'm more of an observer and he just tends to beat me up."
There is another all-Ryder Cup clash for a place in the quarter-finals - World Number One Lee Westwood against Ian Poulter, who won the World Golf Championships-Accenture Match Play title last year.
Westwood was in dazzling form for the second day running, seven under par in beating Australian Aaron Baddeley 4 and 3.
"I've carried on from where I left off in Indonesia and Korea," said Westwood, who is now seeking his third successive victory.
"I will try to keep that going, but match play is different - you can play well and lose."
Poulter has shown that under the tournament's new format it is also possible to come through the group without winning.
He halved with Scot Paul Lawrie just as he had with Italian Francesco Molinari, but progressed because Molinari then ended the hopes of 1999 Open Champion Lawrie.
Luke Donald and Martin Kaymer, both of whom could take the Number One spot off Westwood this weekend, had their second victories.
Donald, who beat the German in the final in Arizona three months ago, overcame defending champion Ross Fisher 3 and 1, but Fisher also went through after an astonishing win over lone American Ryan Moore earlier in the day.
Moore went four up on the outward half and was still three ahead with four to play, but Fisher won them all.
Donald next plays Swede Johan Edfors and Fisher is up against Masters Champion Charl Schwartzel.
Kaymer, meanwhile, has so far defeated Koreans Y E Yang and Noh Seung-yul. He might have had to face Paul Casey next, but the World Number Nine was the highest seed to go out after losing to Alvaro Quiros and then Søren Kjeldsen.
There was also the first three-man play-off in the history of an event which until two years ago had always been staged at Wentworth Club.
That was because Schwartzel, Edfors and Miguel Angel Jiménez all won one game and lost one. Jimenez went out when he bogeyed the first extra hole and Schwartzel topped the group when Edfors bogeyed the next.
McIlroy said about facing McDowell: "He's not going to give me anything - it's going to be a really tough match.
"I'll just try and treat it like I'm playing anyone else. I'm here to try to win a tournament and I need to get through him - that's the number one thing on my mind."