Partial History

Wizards of the Coast D&D (2000-present)

First, the consistent rules: “normal” level-up occurs after sufficient XP is accrued. XP can be gained in a variety of ways: combat or other “encounters,” as a reward for completing quests or other narrative milestones, or as a bonus for good role-playing. Since XP can be awarded “normally” for just about any reason the DM wants, there aren’t really any “special” ways to gain XP that are outside that norm.

Beyond that, we have some variety.

Simple case out of the way first: 4th edition (2008) did not include anything that affects level other than the normal level-up for XP, nor anything that did anything special with XP.

This is almost true of 5th edition (2014, updated 2024), except, unfortunately, they decided to bring back the deck of many things, which 4e had wisely left out. Drawing the Comet card could cause the next encounter to automatically level you up regardless of how much XP you needed or how little XP the encounter would ordinarily be worth. Drawing the Fool costs you up to 10,000 XP (but never so much that you would lose a level), while drawing the Jester can grant 10,000 XP. As far as I know, however, these are the only exceptions to the normal XP and level-up rules.

3rd and v.3.5 editions

Editions before 4th did include things that manipulate level and/or XP. The 3rd edition (2000) and v.3.5 revised edition (2004), for example, included temporary and permanent level loss as part of curses, certain monsters’ attacks (especially among the more spectral undead), or for doing things like trying to use a holy weapon as an Evil character. Most forms of returning from death would also cause the restored character to lose a level.

The bard’s inspire greatness was a unique case that could actually grant “bonus Hit Dice,” which is, at least in these editions, the same as extra levels... probably. In reality, inspire greatness was pretty vague about the full ramifications of these bonus HD and there are a lot of questions along the lines of “but do they count for this?” that are impossible to answer decisively based on the limited rules.

(Technically, they did print a monster ability that involved “positive levels” as a counterpart to “negative levels”—the description suggested it would be associated with celestial creatures—but they neglected to actually print any creatures that actually had this ability. Yeah, no one knows what’s up with that one.)

Certain spells, and the creation of magic items, would cost XP in these editions, too, though characters were not allowed to spend so much XP that their level would go down. I don’t believe anything granted XP outside the norm, but since “the norm” could include anything and everything, I’m not really sure what that would mean.

These rules were fairly well reviled, however. While negative levels were effective for making the monsters that inflicted them truly scary to players, they were a bookkeeping nightmare. And despite the fact that item creation was well-known as being extremely powerful, many, many players avoided doing so because they did not want to deal with the headache that was XP costs. Players certainly like the sound of inspire greatness, but in reality it only sees much use in theoretical optimization, where favorable answers to the myriad questions around it can be assumed. In actual games, bards tend to prefer more certain bonuses. Which is why they were removed in 4th edition, and mostly stayed gone in 5th edition.

About TSR D&D (1974-1997)

I believe that 3rd edition and its revision have the various effects they do because prior editions had them, but I do not have as much familiarity with the details. Certainly, however, those older editions have a reputation for these kinds of “permanent” changes to a character, and fine answers from Daniel R. Collins and Korvin Starmast provide citations for these kinds of things.

Short Answer: Leveling up came from games before D&D

You will find quite a bit of information here that I won't repeat.

Longer Answer

You could also lose levels, from the original game until at least 3.x.

If you go back to Original D&D, AD&D 1e, AD&D 2e (all TSR editions that I played), there were a variety of Undead Monsters (and a few magical items, such as the Deck of Many Things) that could remove levels.

• Specters in Original D&D removed 2 levels with a hit.
• Wights removed 1 level with a hit. Wraiths did the same, being stronger than Wights.
• Vampires could remove 2 levels with a hit

While the detailed history of leveling UP is in the linked Q&A, the leveling down was a feature that WotC seemed to mostly dislike. But, if you became dead, and were then raised from the dead, that return to the living could cost you a level in D&D 3.x.

Raise Dead (excerpt germane to your question)

You restore life to a deceased creature. You can raise a creature that has been dead for no longer than one day per caster level. In addition, the subject’s soul must be free and willing to return. If the subject’s soul is not willing to return, the spell does not work; therefore, a subject that wants to return receives no saving throw.

Coming back from the dead is an ordeal. The subject of the spell loses one level (or 1 Hit Die) when it is raised, just as if it had lost a level or a Hit Die to an energy-draining creature. If the subject is 1st level, it loses 2 points of Constitution instead (if this would reduce its Con to 0 or less, it can’t be raised). This level/HD loss or Constitution loss cannot be repaired by any means.

(Won't comment on 4e, as I didn't play it).

Other experience point drains included the mechanics like

• you had to expend XP to write some scrolls

  • The creator must have prepared the spell to be scribed (or must know the spell, in the case of a sorcerer or bard) and must provide any material component or focus the spell requires.

  • If casting the spell would reduce the caster’s XP total, she pays the cost upon beginning the scroll in addition to the XP cost for making the scroll itself. Likewise, a material component is consumed when she begins writing, but a focus is not. (A focus used in scribing a scroll can be reused.) The act of writing triggers the prepared spell, making it unavailable for casting until the character has rested and regained spells. (That is, that spell slot is expended from her currently prepared spells, just as if it had been cast.)

• you had to expend XP create some magic items.

  • Craft Staff [Item Creation] Prerequisite Caster level 12th

  • Crafting a staff takes one day for each 1,000 gp in its base price. To craft a staff, you must spend 1/25 of its base price in XP and use up raw materials costing one-half of its base price. A newly created staff has 50 charges. Some staffs incur extra costs in material components or XP, as noted in their descriptions. These costs are in addition to those derived from the staff’s base price.

Source for the above is D&D 3.5e SRD.

In a general sense, the XP-impacting loss of levels from the TSR editions was replaced with other mechanics.

In the current edition (5e) you can lose STRENGTH points (shadow can do this on a hit), or have your MAX HP reduced (vampire can do this on a hit) by the attacks of certain undead (those are but two examples). The previous edition's "you lose this many levels" or "you lose this many XP" consequence of a hit is gone.

Note: I have played every edition of of D&D except 4e.
From Monsters and Treasures, Vol II, Original D&D

It is hard to prove a negative, but I am unaware of any mechanical effects that would decrease a character level in 5E and I am not aware of any that would increase actual level other than levelling up.

This question and answer is highly edition sensitive. I am going to assume that you are asking about 5e-2014 since that is I believe the one most commonly being played currently and the only one I am qualified to provide an answer for.

It is hard to prove a negative, but to the best of my knowledge, there is no canon effect in 5e that would decrease levels and levelling up is the only way to increase levels.

Notably, the Comet card from the Deck of many things automatically gets you enough experience to gain a level if you manage the required feat, but mechanically, that is just gaining a level.

Prior editions did have more canon effects that could decrease levels, including the effects of certain undead. But it has been a long time since I've dealt with that.

As homebrew, this sounds interesting, though it could cause both mechanical and story issues.

What you are proposing is solidly in homebrew territory. As homebrew, I personally think it is interesting, but I see potential balance and story issues.

On the balance side, most editions of DND including 5e assume that the characters are the same level or at least very close. Some of the earliest editions were forgiving of this and it wasn't unheard of to have widely varied levels in AD&D, but the power curves there were somewhat flatter and characters tended to die often anyway. In 5e and most other editions, things get weird and often uncomfortable if the PCs are more than a level apart.

Also, from a story perspective, it might be hard to explain. That might be something you just don't care about, or the sponsor of this casino might just be so powerful as to make whatever is necessary happen. But it may be hard to come up with a story justification that makes sense.

In some pre-5e editions some artifacts could also increase levels in some circumstances. For example, the 3.5 artifact the Draco Mystere from the Draconomicon is a minor artifact which gives the readers some benefits, but if they are a sorcerer then also gives them another level.