The number of unemployed people in Spain dropped by 10,221 to 4.1 million in December, recording the steepest decline since 2000, the ministry of employment and immigration said on Tuesday.
During the month, unemployment numbers fell in services and agriculture sectors while increased in manufacturing and construction.
Spain, the fourth-largest economy in the euro zone, is facing the highest unemployment rate in the eurozone at around 20 percent.
Last month, Moody's Investor Services said that it had put Spain's Aa1 debt rating under review for a possible downgrade taking into account the large debt burden of the country and its funding needs next year. The nation will need 170 billion euros ($228 billion) next year.
Budget deficit of Spain, which accounted for 11 percent of country gross domestic product in 2009, was the third-biggest in the euro region.
Madrid introduced stringent austerity measures six months ago to save 15 billion euro and avert a debt crisis. This included civil servant salary cuts and scrapping of bonus payments to new mothers.