After their UEFA Champions League exploits against Milan during the week, Atletico looked off the pace and laboured at Vicente Calderon, with Espanyol proving to be resolute opponents.
Clear-cut chances were few and far between for long spells, with David Villa denied by visiting goalkeeper Kiko Casilla in a rare sight of goal early on.
But Diego Costa eventually netted his 22nd La Liga goal of the season after showing a superb turn of pace to give the hosts the win they needed and keep their title push on track.
Espanyol enjoyed their fair share of pressure in the final 20 minutes, but Atletico held on to keep pace with Real following their 1-0 win in Malaga.
The 4-1 over Milan in midweek ensured that Atletico will be present in the Champions League quarter-finals for the first time since 1997, but coach Diego Simeone was quick to remind his players in the build-up to this match that they must remain focused domestically as well.
Although Atletico got off to a relatively sluggish start, they did create the match's first real chance in the 14th minute, as Casilla tipped Villa’s header around the post following a dangerous free-kick delivery from Jose Sosa.
Thibaut Courtois pulled off an impressive stop of his own five minutes later, acrobatically parrying the ball away after Sergio Garcia's initial shot had taken a big deflection off Toby Alderweireld.
Costa clearly felt aggrieved 27 minutes in as referee Pedro Perez waved away his penalty claims after the Spain international had appeared to be unfairly brought down by Juan Fuentes.
Atletico continued to lack cutting edge at the beginning of the second half as the match started to become disjointed, but they did finally find the breakthrough in the 55th minute.
Villa played a clever pass behind Diego Colotto and Costa burst past the Argentinian before charging into the area and confidently slotting past Casilla.
Costa could have doubled his tally 10 minutes later as he darted between Colotto and Hector Moreno, evaded Casilla and then shot from a narrow angle, but he was unbalanced and his effort went well over.
Espanyol played with renewed determination in the final 15 minutes and David Lopez forced Courtois into a crucial save, but Atletico ultimately held on for a slender victory to remain in the hunt near the summit.
