Mark Viduka put Leeds back on terms early in the second half, but the deadly partnership of Figo and Raul combined again for the Spanish international to score the winner.
Leeds United fell victim to the superstar duo of Raul and Luis Figo against Real Madrid in The Bernabeu - but still enhanced their growing Champions League reputation.
David O'Leary's rapidly developing side pushed the holders all the way in front of watching England coach Sven Goran Eriksson.
And while Real moved into the quarter finals at the head of Group D, Leeds demonstrated enough flair and resilience to suggest they can still make an impact on the later stages of the competition.
Leeds will also feel they suffered a double dose of ill-fortune before finally being eclipsed by Real.
Champions League specialist Alan Smith gave Leeds an early lead as they looked to add Real's scalp to Lazio and Anderlecht after emerging as the competition's surprise package.
But Real quickly levelled through a clear handball by Raul before an outrageous bounce gave Figo their second on the stroke of half time.
Mark Viduka put Leeds back on terms early in the second half, but the deadly partnership of Figo and Raul combined again for the Spanish international to score the winner.
Leeds have excelled on their travels in the Champions' League - and they were in business again inside the first five minutes in The Bernabeu.
Viduka raced clear of the Real defence, and even though Smith looked suspiciously offside when he received his pass, he had no hesitation in steering a composed finish past Cesar Sanchez.
If Leeds' opener was suspicious, Real's equaliser two minutes later was outrageous.
Figo's free kick was guided in by Raul's hand at the near post, an offence witnessed by everybody in the stadium apart from Polish referee Ryszard Wojcik and his assistants.
It was cruel on Leeds, but they more than held their own in a low key first half until they were struck by another piece of outrageous bad fortune four minutes before half time.
Figo's harmless cross looked destined for the arms of Leeds' keeper Nigel Martyn until it inexplicably took a wicked bounce off the turf and bounced in at the near post.
The fast-flowing start to the second half illustrated that both teams had already ensured qualification for the quarter-finals and were playing with a sense of freedom.
And Viduka restored equality for Leeds after 53 minutes when he rose unmarked to meet Ian Harte's corner and power a header past Cesar.
The Leeds celebrations were short-lived as Real pushed forward again to go ahead four minutes later.
Captain Lucas Radebe had already made a brilliant saving tackle to stop Morientes, but he was powerless as Raul stole in on Figo's cross to head past Martyn from close range.
Leeds suffered a blow after 61 minutes when Radebe appeared to twist his right knee making a clearance and was stretchered off to be replaced by Gary Kelly.
The front line trio of Smith, Viduka and Harry Kewell were posing questions of the Real defence - and the big Australian saw a powerful drive glance off an upright as Leeds refused to simply accept their fate.
Kewell picked up a yellow card for a late challenge on Claude Makalele, who had earlier got away with a heavy challenge on the Leeds midfield man.
And Makalele was booked for the latest in a succession of late challenges, this time on Viduka.
Leeds ended defeated - but will have taken great heart from the manner of their performance.
Real Madrid: Cesar Sanchez, Geremi, Hierro, Karanka, Solari, Makelele, Celades, McManaman, Figo, Morientes, Raul. Subs: Casillas, Salgado, Savio, Guti, Munitis, Tote, Rivera.
Leeds: Martyn, Harte, Radebe, Ferdinand, Matteo, Bakke, Dacourt, Batty, Kewell, Smith, Viduka. Subs: Robinson, Kelly, Wilcox, Burns, Maybury.
Referee: Ryszard Wojcik (Poland)