Lilly, building arm strength following left shoulder surgery, struck out nine while allowing one run on three hits over seven innings in a 2-1 victory over the Burlington Bees.
He's expected to join the Cubs this weekend for their series in Milwaukee with the Brewers.
Lilly registered the first hit for the Chiefs in the third inning, lining a single over shortstop.
The veteran left-hander threw four innings in his first rehab outing with Iowa of the Triple-A Pacific Coast League. He allowed one run on a solo home run, walked one and struck out four.
Lilly threw only 51 pitches in that outing. He was stretched out significantly more Monday.
Lilly is 103-84 with a 4.25 ERA for his career in the big leagues. The 34-year-old lefty has pitched for five teams (Expos, Yankees, Athletics, Blue Jays and Cubs) over 12 seasons. He went 12-9 with a 3.10 ERA in 2009.