Gerard Moreno was the hero for the hosts, slamming home a half-volley deep into injury time, as Quique Sanchez Flores' side recorded their first victory over Madrid since 2007.
Despite winning three UCL trophies in his four seasons at the club, Bale has not made the kind of impact Real was hoping for when it paid a then world-record 85 million pounds (US$117.48 million) to prise him from Tottenham Hotspur.
Moreno's late strike was perhaps harsh on Zidane's side, but Espanyol were excellent and also saw a perfectly good goal ruled out earlier on in the evening.
But centre-back Varane, who played the whole 90 minutes against Espanyol, insists you can never write off Real's chances. Benzema replaced Isco in the 69th minute.
Real Madrid lost 1-0 away at Espanyol yesterday after resting the likes of first-team regulars Cristiano Ronaldo, Karim Benzema and Daniel Carvajal. Recently, though, he has been something of a liability and Los Blancos look more effective these days when he is not playing.
In 1991, Real Madrid were forced to give champions Barcelona a guard of honour - while the Catalans had to repay the favour in 2008. It's a defeat that hurts and it's a poor result.
Toni Kroos (knee), Marcelo (hamstring) and Luka Modric (hamstring) all still remain sidelined, just a week ahead of the UCL return game at the Parc des Princes.
"We're not looking at the points, we have to focus on the games and try to win them because that's what this badge demands of us".
Fit again Gareth Bale almost gave the visitors an early lead, reacting first to Achraf Hakimi's deflected cross but poking his near-post header too close to Diego Lopez. His right-foot effort was judged to have missed the target completely, with the officials failing to see a clear deflection off goalkeeper Keylor Navas. I don't believe it was [a lack of motivation].
Girona remained in the fight for a UEFA Europa League spot by defeating RC Celta de Vigo 1-0 at home, continuing their impressive debut season in the first division. "I'm angry for my players, because they conceded a goal in the last minute. the opposition did not enjoy many chances", said the Frenchman. "We expect to face a confident, secure team".