Marcos Alonso scored the third at the Estadio Santiago Bernabeu on Tuesday night, but the referee disallowed the goal after a VAR review for a clear handball by the Spanish player.
Initially the goal was awarded, but after a few minutes, it was correctly disallowed, with the Champions League quarter-final on a knife-edge.
Chelsea's second goal, also controversial
Chelsea's second goal at the Bernabeu came with controversy. It all started with a corner that should not have been given because the last player to touch the ball was a Chelsea player before the ball went behind.
Reece James' shot was adjudged to have been blocked by Luka Modric, but replays showed that the Chelsea man's shot didn't take any other touches on its way wide.
Pavel Fernandez, referee specialist for Radio MARCA, said that Chelsea's second goal should not have been allowed to stand.
"There is no corner," Fernandez said on Radio MARCA. "That corner should not have been taken because the last player to touch the ball was a Chelsea player."
The Real Madrid players protested strongly about the decision just before the corner was taken and then the cross from the corner led to Antonio Rudiger's goal.