European titleholders Madrid scored twice in the final seven minutes to take command of the last-16 tie after Wednesday's opening leg in the Spanish capital.
PSG broke the deadlock thanks to Adrien Rabiot in the 33rd-minute before Cristiano Ronaldo converted a penalty on the stroke of half-time.
The French visitors controlled proceedings in the second half but sensationally collapsed during the closing stages as Ronaldo and Marcelo condemned PSG to a two-goal defeat.
"Madrid have something," Xavi told So Foot . "Against them, you can never miss your chance, otherwise they will punish you. But the worst thing is that they hurt the opponent with nothing.
"A counter-attack is enough for them to take things into their own hands. The game ends and you look at the score and say 'F***, 3-1, how did they do that?'
"You almost think it's an injustice that PSG lost by such a big margin because it was a game that should have ended 1-1, 2-2 or 2-1 for PSG."
The former Barcelona star went on to say that Madrid are not a club that worries about playing well, with Los Blancos focused only on finding a way to win.
"It's inexplicable, Real Madrid didn't play, but still won," Xavi continued. "I saw the broadcast on Spanish television with [former Madrid player and coach Jorge] Valdano and he said something very true.
"In this match there were several phases, very different from each other, and there was a moment in which PSG dominated clearly.
"During those siege minutes in the Madrid area, it was at that precise moment that PSG should have scored the second."
Xavi added: "Were Madrid superior to PSG? For me, no, but they don't care if they are superior, if they dominate or are dominated.
"Their philosophy is simply to win. That is what makes them so difficult to play against in the [Estadio Santiago] Bernabeu, for example. PSG played like Barca."
PSG responded to their loss in Madrid with a 5-2 win over Strasbourg in Ligue 1, but the French league leaders have a tough stretch of the season ahead.
Unai Emery's side face Marseille in back-to-back matches, one in the cup and one in the league, before welcoming Madrid to Parc des Princes on March 6.