With XSLT 2.0 (as implemented by Saxon 9 or AltovaXML tools) you can use xsl:for-each-group group-starting-with and a recursive function:
<xsl:stylesheet
xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
version="2.0"
xmlns:xsd="http://www.w3.org/2001/XMLSchema"
xmlns:mf="http://example.com/2010/mf"
exclude-result-prefixes="xsd mf">
<xsl:output indent="yes"/>
<xsl:function name="mf:nest" as="element()*">
<xsl:param name="elements" as="element()*"/>
<xsl:param name="level" as="xsd:integer"/>
<xsl:for-each-group select="$elements" group-starting-with="*[starts-with(local-name(), concat('TITEL', $level))]">
<xsl:choose>
<xsl:when test="self::*[starts-with(local-name(), concat('TITEL', $level))]">
<xsl:element name="TITEL{$level}">
<xsl:apply-templates select="."/>
<xsl:sequence select="mf:nest(current-group() except ., $level + 1)"/>
</xsl:element>
</xsl:when>
<xsl:otherwise>
<xsl:apply-templates select="current-group()"/>
</xsl:otherwise>
</xsl:choose>
</xsl:for-each-group>
</xsl:function>
<xsl:template match="ROOT">
<xsl:sequence select="mf:nest(*, 1)"/>
</xsl:template>
<xsl:template match="@* | node()">
<xsl:copy>
<xsl:apply-templates select="@* | node()"/>
</xsl:copy>
</xsl:template>
<xsl:template match="*[starts-with(local-name(), 'TITEL')]">
<TITEL>
<xsl:apply-templates select="@* | node()"/>
</TITEL>
</xsl:template>
</xsl:stylesheet>
With that stylesheet the input
<ROOT>
<TITEL1>Titel 1, 1</TITEL1>
<p>..</p>
<TITEL2>Titel 2, 1</TITEL2>
<TITEL3>Titel 3, 1</TITEL3>
<TITEL3>Titel 3, 2</TITEL3>
<P>...</P>
</ROOT>
is transformed to the output
<TITEL1>
<TITEL>Titel 1, 1</TITEL>
<p>..</p>
<TITEL2>
<TITEL>Titel 2, 1</TITEL>
<TITEL3>
<TITEL>Titel 3, 1</TITEL>
</TITEL3>
<TITEL3>
<TITEL>Titel 3, 2</TITEL>
<P>...</P>
</TITEL3>
</TITEL2>
</TITEL1>