Zinedine Zidane suffered his first defeat since retaking the reins at Real Madrid as Goncalo Guedes and Ezequiel Garay handed Valencia a 2-1 victory at the Mestalla.
The Frenchman had overseen three consecutive wins since stepping back into the Real hotseat following the sacking of former team-mate Santiago Solari last month.
But his 100 per cent record vanished and any momentum gained from his arrival at least halted as Real succumbed to their ninth LaLiga loss of the season.
Guedes gave Valencia – unbeaten in the league since January 5 – the lead 10 minutes before the interval with a fine strike.
That looked set to prove the difference between the sides but former Real defender Garay, who made 31 appearances for the club between 2008 and 2011, headed home seven minutes from time.
It proved pivotal for Valencia as Real striker Karim Benzema pulled one back in the third minute of time added-on – although there was no time left to try to grab a share of the spoils.