It's a kind of a "rouge-lite". Your level resets, but you can bring in your equipment. Most of the level progression is in upgrading, leveling, and crafting equipment.

There's a handful of full-on "rogue-like" challenge dungeons where you can't bring in equipment either.

In every dungeon that lets you bring your own items, your level will start from 1. The level of your equipment doesn't reset. So it's possible to be level 1 with overpowered equipment. How strong your equipment is more important than your level. There are dungeons that doesn't let you bring your own items. Those are the dungeons where all the equipment you find are level 1.