"I'm on level/chapter 12."
or
"I'm in level/chapter 12."
"I am on chapter 12". With the word "level" I'd prefer to use "at". , "I am at level 12".
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"I am on chapter 12".
With the word "level" I'd prefer to use "at". E.g., "I am at level 12". "On level 12" suggests (to me) that you are on the 12th floor.
Do not use "in" with either one.
Sue is reading a book. Jack is reading the same book.
Jack: Where are you in the book?
Sue: I'm in Chapter 12, about halfway through.
Jack: You must be spending a lot of time reading. I'm only in Chapter 4.
Sue: Chapters 1-4 were difficult. It took me a long time to read them. After that it gets easier.