Atletico would have moved above Barcelona and joined arch-rivals Real Madrid on 63 points at the top of the Primera Division standings if they had beaten 14th-placed Osasuna, but the match turned out to be a nightmare for the Rojiblancos.
They were 2-0 down inside 21 minutes to goals from Alvaro Cejudo and Emiliano Armenteros, and 3-0 behind at the break following Roberto Torres's strike.
There were no more goals after the interval from either side, but the damage had been done for Atletico as they suffered only their third league defeat of the season.
A magnanimous Simeone said: "When your opponents are better, like here, you have to congratulate them. Other days you are better. That's football.
"It was a very good game from Osasuna, especially in the opening 25 minutes. We were better in the second half but couldn't get the first goal which could have got us back into the game."
The former Argentina international, who played down suggestions Atletico's midweek Champions League exertions in beating AC Milan at the San Siro had any influence on this weekend's result, added: "It was a great game from them and a bad one from us.
"What I said in the dressing room stays there. What Osasuna did was very good. We cannot only play by ourselves."
Atletico cannot afford to dwell on the defeat for long as next weekend they play host to Real Madrid in a match that could prove decisive to the Rojiblancos' hopes of winning a first Primera Division title since 1996.
Atletico have not beaten Real at home in 15 years, losing 11 of 13 league and cup games in that time, but defender Juanfran Torres is looking forward to the chance to end that miserable run.,
He said on his club's website: "We're eager to prepare this week and think that if we beat Madrid things are going to be different.
"We will prepare well, we are playing in our stadium where we are undefeated (this season) and I'm convinced that we will have a good game and we will win."