The Rojiblancos midfielder broke the deadlock 33 minutes but the defender's late leveller means Los Che remain just a point behind Diego Simeone's side in the Liga standings
The sides were separated by a single point in third and fourth heading into the fixture at Vicente Calderon, where Koke's first-half strike looked set to extend Atleti's advantage.
But Mustafi popped up with little more than 10 minutes to play to nod home a goal of huge significance to Valencia and their continental aspirations.
The importance of the encounter was not lost on either set of players in an opening 30 minutes littered with committed challenges and lapses in discipline.
But with the game struggling to find it's rhythm, Koke's fizzed 33rd-minute effort promised to inject some much-needed life into proceedings.
While fiercely contested, meaningful goalscoring opportunities were at a premium, although Tiago wasted a glorious chance to double the advantage when he clattered the crossbar from inside the Valencia six-yard box.
And it was the crossbar that provided the assist for Valencia's equaliser, with Dani Parejo's free-kick rebounding off the woodwork and sitting up perfectly for Mustafi to finish.
The match would remain all square despite a pair of ill-advised challenges from Javi Fuego meaning Valencia finished with 10 men.
Atleti were without in-form attacker Antoine Griezmann through suspension, while defender Miranda was also banned, and Valencia immediately looked to exploit any potential weakness at the back – Alvaro Negredo trying his luck with an acrobatic effort after four minutes.
Mario Mandzukic was left on the bench for a second consecutive match amid reports of a bust-up with Atleti coach Diego Simeone, but might have found himself called upon in the 18th minute had Fernando Torres seen red for an apparent elbow on Nicolas Otamendi.
The striker got away with a booking, before Juanfran escaped without any punishment when he caught Jose Gaya on the shin with his studs as the pair challenged for a loose ball.
Ill-discipline robbed the first half-hour of any real flow or momentum, but Koke gave the match a shot in the arm with a low drive in the 33rd minute.
After Torres headed an Atleti free-kick into the danger area, Tiago laid the ball off for Koke to rifle home from the edge of the box, although there were suspicions of handball surrounding the assist.
Valencia started the second half brightly, but it was the hosts who continued to look the most likely to find the net.
Diego Alves had to be alert to keep out Garcia as he looked to turn home a Torres nod-down, before Tiago hit the crossbar from close range after the ball was headed down from a corner.
Mandzukic was given his chance as a 61st-minute replacement for Torres, but unnecessarily got himself involved in a confrontation with Otamendi within minutes of coming on, earning a booking.
But worse was to come for Atleti, as Mustafi headed in after Parejo's 78th-minute free-kick from deep rebounded kindly.
Valencia saw Fuego dismissed for a two bookings in as many minutes late on but held out to preserve the narrow margin between these sides in the Liga table.