The Blues head into the match at the Veltins-Arena in third place in Group E, while unbeaten Schalke sit three points clear at the top of the standings.
Leboeuf believes that another defeat for Jose Mourinho's side could seriously dent their chances of reaching the next round of the competition.
"The situation is not tragic yet, but Chelsea can't afford to lose in Germany," he told Goal.com.
"They need at least a draw, and that won't be easy because I went to Gelsenkirchen and it's an unbelievable atmosphere. They can close the roof and it's packed with 60,000 people.
"It's going to be hard, but Chelsea can't afford to lose another game if they want to go through."
Leboeuf spent five years as a player at Stamford Bridge before leaving for Marseille in 2001.