Dortmund's European adventure ended at the group stage last season when four points left them rooted to the bottom of the standings, despite comfortably winning the German league and cup double.
With Wednesday's victory over Real, the 1997 Champions League winners moved top of Group D ahead of Real, Manchester City and Ajax Amsterdam.
More importantly, however, they silenced critics who said they were only able to shine in domestic soccer because their attacking style of play would always be punished by stronger continental teams.
"This is a childhood dream come true," said winning goal scorer Marcel Schmelzer, whose 64th minute strike was a deserved reward for a dominant second half display.
It was also fitting that Schmelzer scored the decisive goal after coach Juergen Klopp specifically told his left back to venture forward as often as possible to bolster Dortmund's attacking options.
"I hope we could satisfy fans and show the critics that we can hold our own in Europe and beat big teams like Real," added Schmelzer, who was recently criticised by Germany coach Joachim Loew.
While Dortmund have won back-to-back domestic titles, their European form has been constantly questioned but they are now in prime position to secure a spot in the knockout stage.
"We know we have had a very good start to the group but we are a long way from having qualified. That is our aim," defender Mats Hummels said.
After three of six matches, Dortmund are on seven points, one ahead of Real with Ajax on three and City on one.
For coach Klopp, the European improvement is a natural development for a team he has been carefully cultivating for four years.
Equally as impressive is the will to win Dortmund showed just a few days after losing their biggest domestic match of the season to bitter local rivals Schalke 04.
"Should anyone start doubting the character of my team then that person would instantly lose my respect," Klopp said. "My boys give everything they have. We may be doing many things wrong but we always want to do things."
- Sports & Recreation
- Marcel Schmelzer