I find that terraforming is one of the most difficult player-skills to develop in Valheim.

If you're just leveling (and not raising or pickaxing), then keep in mind that the tool is trying to bring the ground within its radius to be roughly even to the ground under your feet* but will not alter ground levels more than a little under a meter up or down (or, more specifically, it will alter the ground up to a meter from where it was without using Level Ground and then give up, no matter how many times you click). It could be that the ground you're trying to work is higher/lower than that limit (remember,relative to the ground under your feet), in which case you'll need to either use Raise Ground with the hoe (if it's too low) or a pickaxe (if it's too high) to bring it roughly even to what you want and then use Level Ground with the hoe to flatten and fine tune it.

Also...

1) Level Ground will not reliably produce a perfectly flat ground with just one use - you'll need to click the same spot a few times to get it just right.

2) The hoe doesn't just affect the ground in its radius. The game world exists on a meter-precise grid. Blocks of ground within the effect zone will be altered directly, while immediately surrounding blocks will be altered indirectly as a buffer zone.


* If you want to do things relative to where your cursor is pointing instead of where your feet are, then hold down the left shift key (kb+m) or left trigger (? or left bumper - one of those, haven't played in a while)(controller).