Reforms undertaken since 2010 have boosted economic growth and competitiveness, the agency said, adding that its outlook for the country was stable.
Spain, the eurozone's fourth-biggest economy, was plunged into a double-dip recession in 2008 when a decade-long property bubble burst, wiping out millions of jobs.
Spain's economy emerged slowly from a two-year downturn in mid-2013, posting 0.4-percent quarterly growth — the fastest pace in six years — in the first three months of this year.
"The upgrade reflects our view of improving economic growth and competitiveness as a result of Spain’s structural reform efforts since 2010,” S&P said in a statement.
“Reflecting the effects of these reforms and our expectation that monetary policy in the eurozone will remain highly accommodative, we have revised our average 2014-2016 GDP growth projections for the Spanish economy to 1.6 percent from 1.2 percent."
Spain on Thursday sold ten-year debt at a yield of 2.97 percent, the lowest figure on record
Spain can expect to see growth of 1.1 percent in 2014 and 2.1 percent in 2015, the European Commission announced in its recent Spring 2014 forecast.
That 2014 figure is 0.1 percent lower than the Spanish government's figure. The Commission's 2015 forecast is, however, higher than the 1.8 percent predicted by Madrid.
Spain's official unemployment rate, however, remains at 26 percent.