Watch: Former Premier League flop scores cracker as Real Madrid are beaten in La Liga
Real Madrid passed up the chance to move further clear at the top of LaLiga as two early goals saw them slip to defeat at Valencia.
Zinedine Zidane's side had two games in hand on second-placed Barcelona heading into their clash at the Mestalla, but remain just one point clear having been beaten 2-1 by Los Che to lose just their second league game of the season.
Former West Ham striker Simone Zaza and Fabian Orellana struck inside the opening 10 minutes for struggling Valencia, who notched up just their seventh league win of the campaign as the visitors could not add to Cristiano Ronaldo's header on the stroke of half-time.
Juventus loanee Zaza opened the scoring in style as he turned and volleyed Munir El Haddadi's cross past the diving Keylor Navas.
Toni Kroos saw a shot blocked as Real looked to respond immediately, but instead the league leaders found themselves further behind moments later.
The hosts countered at speed and Orellana slotted home between Navas' legs to double their advantage with only nine minutes on the clock.
Both Karim Benzema and Ronaldo saw shots well saved by Diego Alves before the latter marked the 700th club appearance of his career by rising to head home Marcelo's cross just before the interval.
Having won 16 of their previous 21 league outings, a second-half comeback would have been expected.
But it did not come despite the best efforts of Zidane's players and the introduction of Gareth Bale off the bench as the game wore on.
Marcelo fired wide and Kroos had an effort blocked as Daniel Parejo and Zaza kept the Madrid defence honest at the other end.
Bale was introduced just after the hour mark and the Wales international saw an injury-time header cleared away by Valencia skipper Enzo Perez.
Ronaldo was guilty of missing an even better headed opportunity with two minutes of added time remaining, although his blushes were spared as he was flagged offside as he headed wide from in front of goal.
Unlike in recent weeks there would be no last-gasp heroics as even Navas went up for a late corner, with the full-time whistle coming as the set-piece was cleared away.