High-flying Athletic stumble at Valencia
Los Che triumphed over their third-place visitors in an even battle, with Hugo Duro's header splitting the sides at their Mestalla stadium.
Ernesto Valverde's Athletic were unbeaten in 14 matches across all competitions and had won their previous six.
However they came up against another in-form side in Ruben Baraja's sturdy Valencia, who ground out their fourth consecutive La Liga victory to move seventh.
"It's clear that we didn't create as many chances as in other games," said Athletic defender Inigo Lekue.
"If they hadn't scored their goal then we'd be leaving a bit happier."
Sergi Canos went off injured for the hosts early on, while Valencia goalkeeper Giorgi Mamardashvili made two saves from Nico Williams.
The winger's brother Inaki Williams is away at the Africa Cup of Nations with Ghana and Athletic missed his dynamism in attack.
Oihan Sancet fired narrowly off-target for Athletic after the break, before Duro missed a huge chance from close range for Valencia.
However two minutes later he broke the deadlock by nodding Jose Gaya's looping cross beyond the reach of Unai Simon in the 61st minute.
Mamardashvili made a superb save to thwart Unai Gomez as the Basques chased the leveller, but Valencia held firm as Athletic suffered only their fourth top flight defeat.
After battling relegation last season and only securing survival on the final day, Valencia are enjoying a good campaign and their players celebrated joyfully with supporters at full time.
Barcelona, fourth, can now overtake Athletic if they avoid defeat at Real Betis on Sunday.
League leaders Girona host Sevilla and Real Madrid, second, face bottom side Almeria.
Earlier Saturday Las Palmas, eighth, earned a solid 2-0 win at Las Palmas, while Real Mallorca struck late to hold Villarreal to a 1-1 draw.