Borussia Dortmund took the lead of the Group of Death on Wednesday after a massive Champions League victory over Real Madrid.
Also in Group D, Manchester City continued their dismal run in the competition with a 3-1 defeat to Dutch club Ajax.
"I think that they played better than us. They played better football," crestfallen City coach Roberto Mancini told Sky Sports.
"It's probably my fault because I didn't prepare the players well for this game. I accept fault for this defeat.
"I think it's very difficult now (for City to qualify)."
The Bundesliga champions Dortmund held on bravely for a 2-1 win over the Spanish champions to ensure Madrid's miserable record in Germany was extended.
Marcel Schmelzer's 64th-minute strike proved to be the winner for Dortmund. Cristiano Ronaldo had pulled Madrid level two minutes after Robert Lewandowski opened the scoring in the 36th.
It was Dortmund's first win at home over a Spanish opponent at the sixth attempt, while Madrid have now lost 17 of their 24 games in Germany against a German opponent. Madrid's only win was a 3-2 win at Bayer Leverkusen in 2000.
After three games, Madrid are second in the group with six points behind Dortmund with seven.
English champions City were stunned by Ajax after goals from Siem de Jong, Niklas Moisander and man of the match Christian Eriksen.
The result sees Ajax leapfrog City into third place with three points from three games while City remain on just one point.
And the unlikely results continued with Champions League debutants Malaga also shocking seven-times winners AC Milan.
Joaquin made up for missing a penalty with the winner in a memorable 1-0 Group C victory.
After Kevin Constant had brought down Jesus Gamez on the edge of the area, former Spain winger Joaquin drove his 44th-minute spot kick high towards goal but it skimmed the top of the crossbar and flew into the crowd.
However, he made no mistake in the 64th minute when played through by Manuel Iturra and his low shot beat Milan goalkeeper Marco Amelia and went in off the post to give Malaga an impressive three wins out of three.
In the other Group C match, Alexander Kerzhakov's second-half penalty gave Zenit St Petersburg a hard-earned 1-0 win over Anderlecht.
Kerzhakov calmly converted the 72nd-minute spot kick for his 200th career goal as Zenit withstood late pressure from the Belgian champions to earn their first points.
Netherlands internationals Klaas-Jan Huntelaar and Ibrahim Afellay scored late goals as Schalke outclassed Arsenal to win 2-0, lifting the team above the English side to the top of Group B.
The German visitors had wasted a string of good openings by the time Huntelaar put them in front with a low drive in the 76th minute, his ninth goal of the season for club and country.
Afellay clinched victory for Schalke in the 86th, slotting home from close range after Jefferson Farfan had evaded Arsenal's defence again down the right flank.
"We had some chances but we made some stupid mistakes"
Dinamo Zagreb defender Domagoj Vida
Also in Group B, Greece striker Kostas Mitroglou scored in injury time as Olympiakos came from behind to beat struggling French champions Montpellier 2-1.
Olympiakos now have three points to keep their qualifying hopes alive. Montpellier, who are only a point above the relegation zone in the French league, are last with one.
Jackson Martinez scored in each half to help FC Porto to a 3-2 win over Dynamo Kiev for the Portuguese club's third straight win in the competition.
The Colombian striker tapped in a low cross from Lucho Gonzalez in the 78th for victory after the visitors had twice equalised to get back into the game.
Zlatan Ibrahimovic and Jeremy Menez gave Paris Saint-Germain a 2-0 win at Dinamo Zagreb, inflicting a ninth successive loss in the Champions League for the Croatian team.
PSG are second in Group A with six points, three behind FC Porto and three in front of Dynamo Kiev.
"We had some chances but we made some stupid mistakes,'' Dinamo Zagreb defender Domagoj Vida said.
"PSG used its opportunities".