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 on Monday, comes just a day after Keylor Navas left Levante to join the European champions on a six-year deal for an undisclosed fee.
Navas' arrival would have left Jesus further down the pecking order at Madrid, with Diego Lopez and Iker Casillas also still on the books of the Liga giants.
Jesus 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 a further two years.
A statement on Madrid's official website read: "Real Madrid and Levante have reached an agreement for the transfer of Jesus Fernandez.
"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."
Jesus 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.