Los Merengues make it eleven wins in a row in all competitions with a tense win over La Liga's third place side.
A goal of real class midway through the first half from Karim Benzema gave Madrid the lead, with further goals from Sergio Ramos and Cristiano Ronaldo sealing the win despite Roberto Soldado scoring a second half brace for the home team.
The game started at a frenetic pace with both sides looking to push forward whenever possible. Valencia had its first shot within the very first minute while Real Madrid nearly took the lead on 10 minutes when Karim Benzema flashed a well struck shot wide from the edge of the area.
The French international made no mistake with his next chance, controlling a quick free kick from Xabi Alonso brilliantly with his left foot before rifling a fantastic volley into the back of the net from 18 yards to give his side the lead.
Madrid was beginning to enjoy itself as the half wore on, Sami Khedira having an explosive shot chalked off for offside, and Ronaldo meanwhile was at his effervescent best, indulging in a series of keepie-ups while running with the ball in the middle of the pitch.
However, it wasn't all going Mourinho's side's way, former Real Madrid academy player Dani Parejo going close, before Valencia had a penalty appeal turned down by the referee José Antonio Teixeira Vitienes.
Ronaldo nearly made it 2-0 just before halftime, racing through on goal only to see his effort pushed away well by Diego Alves.
Valencia went close to equalizing shortly after the break, Jeremy Mathieu sliding a tantalizing ball across Casillas' six yard box with Roberto Soldado inches away from diverting the ball into the net.
Madrid began to lose their discipline as Valencia looked to being edging their way back into the game, Ronaldo, Marcelo and Mesut Ozil all finding their way into the referee's book in quick succession.
Despite the ill-discipline, it was Madrid that got the next goal of the game, Sergio Ramos heading home from an inviting Mesut Ozil corner. The goal appeared to give Madrid the breathing space it needed to see out the rest of the game.
Valencia, however, had other ideas. Soldado rifled home a volley through a crowded penalty area to make it 2-1 after Pablo Hernandez's shot appeared to have been pushed away to safety.
Ronaldo soon restored Madrid's two goal lead with a fine finish from an acute angle after Diego Alves had wrongly rushed from his line to meet the attacker.
The end-to-end nature of the game was far from over however. Soldado again got in on the act, the in-form forward grabbing his second of the game after superb buildup play from Pablo on the wing.
The game ended in controversy as Valencia's players surrounded the referee after Ronaldo had appeared to block a last-minute goal-bound effort with his arm.
An eleventh win in a row maintains Madrid's three point lead over Barcelona at the top of the table. Valencia, meanwhile, is now seven points off the pace in La Liga, but can take pride from the manner of its second half performance.