Carlo Ancelotti's side had recovered from a one-goal deficit at the Bernabeu to level the scores in the European contest, but Sheriff scored in the final exchanges to record a 2-1 victory.
The capital giants were held to a goalless draw by Villarreal in their last league contest, but they are currently top of the table, one point clear of second-placed Real Sociedad.
Here, Sports Mole rounds up all of Real Madrid's injury and suspension news ahead of their battle with Espanyol, who are currently 14th in the table.
Gareth Bale
Status: Out
Type of injury: Hamstring
Possible return date: Unknown
Gareth Bale remains on the sidelines due to the hamstring injury that he picked up ahead of the clash with Celta Vigo on September 12.
Ferland Mendy
Status: Out
Type of injury: Muscle
Possible return date: Unknown
Ferland Mendy is currently unavailable for selection due to a muscular problem, but the Frenchman has started training on the grass at the club's training ground and could return soon after the international break.
Marcelo
Status: Major doubt
Type of injury: Muscle
Possible return date: October 3 (vs. Espanyol)
Marcelo has been struggling with a muscular problem in the early stages of the season and was again absent against Sheriff, making him a major doubt for this weekend's contest.
Dani Ceballos
Status: Out
Type of injury: Ankle
Possible return date: Unknown
Dani Ceballos sustained an ankle injury while on duty with Spain during the Tokyo 2020 Olympics and is not yet close to making his return for Ancelotti's side.
Dani Carvajal
Status: Out
Type of injury: Calf
Possible return date: Unknown
Dani Carvajal will be on the sidelines for the next month or so due to the calf problem that he picked up in the clash with Valencia on September 19.
REAL MADRID'S SUSPENSION LIST
Real Madrid have no players suspended for this match.