The 26-year-old has signed a two-year contract with the club following Keylor Navas' move in the other direction on Sunday.
The transfer, which was announced Monday, comes just a day after Costa Rican goalkeeper Keylor Navas left Levante to join the European champions on a six-year deal for an undisclosed fee.
MORE: Biggest summer transfers | Soccer's beautiful fans | WAGs
Navas' arrival would have left Fernandez further down the pecking order at Madrid, with Diego Lopez and Iker Casillas also still on the books of the Liga giant.
The keeper has therefore opted to leave the Santiago Bernabeu and head for Estadi Ciutat de Valencia, where the 26-year-old has signed a contract that keeps him at the club until 2016 with the option to extend his stay by an additional two years.
"Real Madrid and Levante have reached an agreement for the transfer of Jesus Fernandez," a Real Madrid statement read. "The club wishes to thank Jesus for his professionalism and dedication over all these years and we wish him the best of luck in his new journey."
The player moved to Real in 2010 but has featured largely for the club's B team and made just two Liga appearances for the club during his four-year stay.