"The board of Repsol judges the offer of a nominal amount of five billion dollars unsatisfactory for the interests of the company because it considers that the amount does not match the loss suffered by Repsol," the company said in a statement, citing an "exhaustive" analysis of the offer.
Repsol launched a legal battle for $10 billion in compensation after Argentina in May 2012 expropriated 51 percent of shares in the oil company YPF from Repsol, its majority shareholder.
Argentine President Cristina Kirchner argued that Repsol had failed to make agreed investments needed to expand domestic production.
Her signing of the expropriation bill soured relations with Spain, the country's former colonial master.
Repsol said that the Argentine government had offered it $5 billion in the form of stakes in the huge Vaca Muerta oil deposit in the country.
"Repsol's board and directors welcome the Argentine government's interest in finding a negotiated solution and hope that an open attitude to dialogue will be maintained," the company said.