Which is the correct preposition?

Actually, that would depend on context. Usually, one would say "on" such and such a level, assuming that one refers to a construction.

Where's your office?

I'm on the eighth level.

There are, however, contexts in which one would say "at" such and such a level. For example, firefighters in a building, communicating by radio might say:

OK, Captain, I'm at the eighth level right now.

Descending an elevator in a mine (once again, communicating by radio):

Yeah, we're down at the eighth level now.

However, in most contexts, one would use "on." Keep in mind, that for references to buildings, one would almost always say "floor," rather than level. In those cases, although both the English and North Americans would say ground floor, the English refer to the floor above that as the first floor, while Americans refer to it as the second floor. This applies to the use of storey, as well, but both the English and the Americans refer to storeys in the same manner. Storey is the English spelling, the Americans use story.

It depends on the context. "At" suggests some level attained. For example, a mountain climber radios the base camp to let them know he's managed to get up to 20,000 feet. "On" suggests location more than progress attained. For example, "I live on the 18th floor".

Interesting we both found it handy to use radio communications.

Thanks, Setanta and blatham.