Soldado's late header helped keep Unai Emery's side four points behind second placed Barcelona after Tino Costa's early penalty had been canceled out by Hector Moreno's goal
Unai Emery tinkered with his team selection in preparation for the midweek clash against Chelsea with Jonas, Sofiane Feghouli and Roberto Soldado rested for Espanyol's visit.
However, despite the absence of three of their first-team Los Che took an early lead through Tino Costa's penalty but Valencia failed to score a second to kill the game off.
And Hector Moreno deservedly leveled the tie midway through the second-half only for Unai Emery to introduce Roberto Soldado who restored Valencia's lead with a superb header.
In a high-octane match both sides had spells of dominance, and it was Valencia who started on the front foot with Cristian Alvarez saving from Pablo Hernandez early on.
Valencia then took the lead when they were award a sixth minute penalty. The referee spotted an infringement on Angel Dealbert and Costa stepped up to emphatically fire Valencia ahead.
Mauricio Pochettino's side then asserted themselves on the match with a sustained period of possession and could have been level but for a flying save from Diego Alves.
Vladimir Weiss swung in a free-kick to Joan Verdu whose touch at the near post was turned behind for a corner by a strong hand from the Brazilian 'keeper.
The pendulum then swung back in the direction of the home side with Aritz Aduriz and Pablo Hernandez troubling the Espanyol defense but neither were able to extend Valencia's lead.
Espanyol searched for an equalizer in the early exchanges of the second-half forcing Los Che back with Valencia playing on the counterattack.
And Espanyol's persistence paid dividends when Rui Fonte cleverly dummied a low cross allowing Moreno to turn the ball home from inside the six yard box.
Unai Emery reacted to the equalizer by introducing Soldado into the mix and the striker put Valencia ahead within five minutes of coming on. Costa swung the ball across and Soldado managed to escape his marker before directing his header past a helpless Alvarez.
Despite Espanyol's attempts it was unable to find a second equalizer as the team slumped to its seventh defeat of the season.
Valencia faces Chelsea in the Champions League on Tuesday at Stamford Bridge, with Emery's side requiring a score draw to progress.
Espanyol meanwhile next host Atletico Madrid in La Liga as they will look to recover from a disheartening defeat against Valencia.