The 41.5-metre (136-foot) yacht was donated in 2000 by a business group but left the king open to criticism during hard times in Spain. Each refuelling of the yacht costs more than 20,000 euros, according to the Spanish press.
The group, the Tourism and Cultural Foundation of the Balearic Islands, had said it hoped the king's presence in the Mediterranean archipelago would draw holidaymakers.
Like other assets including the royal palaces, the luxury yacht is owned by the state and managed by the National Heritage for the use of the 75-year-old king and his family.
But the king has taken sail with the yacht less frequently in recent years, making his last outing in August last year.
"The king has taken the decision to ask the National Heritage to proceed with the release of the asset," a spokesman for the institution said late Thursday.
The National Heritage board must now approve the yacht's transfer to the government, which could decide to keep it or sell it.
Juan Carlos won wide respect in Spain for helping guide it through a political transition after the death of dictator Francisco Franco in 1975.
But polls show public confidence in the royal family slumping as people smart from severe cuts to welfare, a double-dip recession and an unemployment rate of more than 27 percent.
The king's son-in-law, former Olympic handball player Inaki Urdangarin is engulfed in a corruption probe over a non-profit institution he ran from 2004-2006 and his wife — the king's younger daughter Cristina — is at risk of being dragged into the affair.
The king provoked outrage among Spaniards in April last year when he took a luxury elephant-hunting safari in Botswana in the midst of the economic crisis. The holiday was only discovered when the king broke his hip and had to return to Spain for treatment, leading the monarch to issue an unprecedented apology.