Antonio Sanabria's penalty five minutes into the second-half handed Sporting their first away win since October as Valencia paid for missing a host of clear-cut chances, most notably through captain Alvaro Negredo.
Neville has now not won in eight league games since taking charge last month.
Victory moves Sporting out of the relegation zone up to 16th with Valencia now just six points off the drop zone in 12th.
"I find it difficult, sat there with some players and coaching staff for 15 minutes, trying to understand what's actually happened out there on the pitch," said Neville.
"It's the most disappointing result of the season, but it doesn't tell the story of the game. It's not a game we should have lost."
Boosted by their progression to the semifinals of the Copa del Rey in midweek, Valencia had started brightly as Sofiane Feghouli blasted over from a good position before Andre Gomes's powerful drive was parried by Ivan Cuellar.
However, they were made to pay for one moment of rash indiscipline as Danilo clipped Jony as he broke into the box and Sanabria converted the resulting penalty for his 10th goal of the season.
Australian international Matt Ryan then made a fine save from Jony's free-kick to keep Valencia in the game.
Yet, Neville's men dominated the last half hour and were desperately unfortunate not to take at least a point.
Negredo powered a header off the post just before the hour mark.
However, the former Manchester City striker had no excuse for not equalising when he twice failed to hit the target with the goal at his mercy in the final 15 minutes.
Valencia now face the daunting challenge of travelling to face European champions Barcelona in the first-leg of their Cup semifinal on Wednesday.
Elsewhere, Sevilla maintained their chase of Villarreal for the fourth Champions League place with their 11th consecutive win at home in all competitions, 3-1 over bottom side Levante.
Kevin Gameiro's first minute opener and Vicente Iborra's goal just after halftime put Sevilla on course for a comfortable three points.
However, Levante were given hope when former Manchester United forward Giuseppe Rossi's shot sneaked under Sergio Rico.
Sevilla killed the game off in spectacular fashion through Yehven Konoplyanka's stunning strike into the top corner to move back within eight points of Villarreal.
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