Ten-man Barcelona saw their lead at the top of the Primera Liga cut to seven points after losing at home to bottom club Espanyol in the city's derby at the Nou Camp.
Former Barca player Ivan De La Pena did the damage with two goals shortly after the interval, when the home side were already a man down following the first-half dismissal of Seydou Keita.
Yaya Toure pulled a goal back for the home side not long after that, but Pep Guardiola's men were unable to come back this time and saw their lead cut by Real Madrid, who thrashed Real Betis 6-1 at the Santiago Bernabeu.
Barcelona had not lost in the league since the opening day of the season, although last weekend's 2-2 draw at Real Betis ended a 10-match winning streak for Guardiola's side, and were heavy favorites against an Espanyol outfit who went bottom following last weekend's 2-0 defeat by Sevilla.
Espanyol had also failed to win a league match since early November and were without a victory at the Nou Camp in the league since 1982.
Barca began brightly and Thierry Henry almost got on the end of Xavi's cross after just six minutes.
And the Frenchman should have given his side the lead eight minutes later, but he inexplicably headed over the bar at the far post from Lionel Messi's pinpoint cross.
Henry was then denied by an alert Carlos Kameni and Xavi shot wide as Barcelona continued to threaten.
Espanyol began to settle after that and the hosts created just one more chance of note before the break, when Messi flashed an angled drive into the side netting nine minutes prior to the interval.
And three minutes later, Barca's luck took a turn for the worse as Keita was sent off for a rash challenge on Moises Hurtado.
The decision appeared harsh and the Nou Camp faithful jeered the officials off the pitch at half-time.
Now a man down, Guardiola sacrificed an attacker, Henry, for a midfielder, Sergio Busquets, at the break.
But Espanyol made their numerical advantage count as they took the lead after 50 minutes.
The visitors broke quickly through Nene, who charged into the area and held off Gerard Pique before picking out the unmarked De La Pena with a neat cross which the Espanyol playmaker nodded home from close range.
De La Pena is something of a Barcelona icon after coming through the youth team and starring in Johan Cruyff's much-lauded 'Dream Team' in the late nineties.
The midfielder has since become a cult figure at Espanyol, but has struggled with a series of injuries this season and was making his first start since returning from his latest setback.
And the 32 year-old doubled Espanyol's lead with a touch of class four minutes later.
Pique passed back to Valdes and the latter's shocking clearance fell to the alert De La Pena, who took one touch and chipped a brilliant shot over the Barca keeper from just outside the box to give Espanyol an improbable two-goal lead.
The home side looked down and out now, but Yaya Toure gave them a lifeline after 62 minutes, when he pounced on a rebound and crashed a powerful left-foot shot past Kameni on the turn.
Barcelona have come back on numerous occasions this season and Espanyol were nervously sitting back on their lead.
The home side began to take more risks late on and substitute Eidur Gudjohnsen came close to grabbing an equalizer at the death.
