Madrid dominated the opening 45 minutes at the Ciutat de Valencia stadium without creating any clear chances. Eden Hazard missed their best opportunity when put through by Marcelo midway through the second half, but started limping shortly afterwards and thus was substituted.
Levante's Jose Luis Morales scored the only goal of the game with 11 minutes to go, with an extraordinary strike from an angle that caught out Thibaut Courtois.
There are no real positives that Real Madrid can take from this game. With Barcelona getting a high-scoring win earlier in the day, Madrid were under pressure to beat Levante and maintain their slim lead at the top -- and they couldn't deliver.
There had been much to like about Real Madrid's first-half performance, as they controlled possession -- but in the final third they were poor. This defeat, coupled with Hazard's injury, means they start a crucial week in the worst possible fashion.
Eden Hazard's injury could not come at a worse time. Having just returned from an almost three-month absence, his involvement in two huge games next week, against Manchester City in the Champions League and Barcelona in El Clasico, must now be unlikely.
Much was expected of Hazard after his €100 million move last summer. He has started just nine league games for Madrid this season and completed 90 minutes in four of them. A return of one La Liga goal so far is just not good enough.
Otherwise, Levante's counter-attack, led by Morales, worried Madrid even as they dominated the game for long spells, and it was no surprise when he scored the decisive goal.
Manager rating out of 10
6 -- Zinedine Zidane made just two changes from the team that was held to a 2-2 draw by Celta Vigo last weekend, with Luka Modric and Isco coming into midfield. His substitutions seemed to be the right ones, injecting pace into the team with Vinicius and Lucas Vazquez, but they did not have the desired effect.
Zidane must be worried by his team's goal problem. Their defence has been much improved this campaign, but there are simply not enough goalscorers in his team with the likes of Gareth Bale and Luka Jovic (both absent on Saturday) not pulling their weight.
Player ratings (1-10; 10 = best. Players introduced after 70 minutes get no rating)
GK Thibaut Courtois, 6 -- No saves to make in the first half as Levante failed to muster a shot on target. More involved after the break, he appeared to be completely caught off guard by Morales' fierce shot for his incredible goal, not even making an attempt to save it.
DF Dani Carvajal, 6 -- A solid performance on the night, Carvajal wasn't able to get forward and threaten consistently on the right-hand side. Had to deal with a tricky Enis Bardhi on the wing for Levante.
DF Sergio Ramos, 7 -- "I always want Sergio with me" Zidane had said this week, describing Ramos as "our captain, our leader, our reference point". Ramos displayed those fighting qualities here, picking himself up after being caught in the ribs by Roger Marti early on. He picked up an early yellow card too, which left him walking a tightrope ahead of El Clasico, a situation he handled really well under the circumstances.
DF Raphael Varane, 7 -- The highlight of Varane's performance was intercepting a really dangerous first-half cross from Tono as Borja Mayoral waited to pounce inside the six-yard box. Madrid's defence weren't overly tested for much of the game as they were often the team on the front foot.
DF Marcelo, 8 -- Started his second game in a row, with Ferland Mendy a yellow card away from suspension, and was probably Madrid's best player. Even so, the suspicion remains that Mendy will return against City and Barcelona. Playing behind Hazard means the wing is Marcelo's to exploit, with the Belgian's natural inclination being to cut inside. One marvellous pass played in Hazard for Madrid's best chance of the game.
MF Casemiro, 7 -- Could have headed Real Madrid in front when gifted an early chance as Aitor Fernandez's high punch fell right to him, but he put it inches wide. Otherwise a quiet game for the Brazilian.
MF Toni Kroos, 6 -- Kroos has generally been consistently impressive this season but this was not his best game.
MF Luka Modric, 7 -- Shot over the bar in the first half when he received the ball in space just outside the Levante box, and then had an even better, on-target effort beaten away by Fernandez. Played well until being substituted late on.
MF Isco, 7 -- Impressed as he looked to find space between the lines after being an unused substitute against Celta Vigo last weekend. Isco has scored five goals against Levante, including finding the net on his three previous visits to the Ciutat de Valencia stadium, but he never really looked like adding to that tally here.
FW Eden Hazard, 6 -- Limped off injured on 67 minutes, after playing 70 minutes on his return from injury last weekend. Involved from the start, often linking up with Karim Benzema, and moving inside from the left. Hazard missed Madrid's best chance of the game in the second half, as when played in on goal by Marcelo, he seemed to lack conviction and got the finish spectacularly wrong.
FW Karim Benzema, 6 -- Has now scored one goal in his last nine league games. Threatened more than once in the first half, both with shots on goal and looking to find teammates with passes in the box, but didn't quite get things right. Should have done better when found by Vinicius late in the game.
FW Vinicius Junior, 6 -- Replaced the injured Hazard with just over 20 minutes to play and provided Benzema with a great chance to equalise with a driving run on the left.
FW Lucas Vazquez, N/R -- Came on for Isco as the team's shape switched to 4-3-3.
MF Federico Valverde, N/R -- On for Modric for the last 10 minutes and couldn't make an impact.