Spain's Employment Ministry data released on Tuesday showed that jobless benefits fell by 117,985 to 4.22 million, the best results for a May since records began.
The number of registered unemployed was down by 357,354 or 7.8 percent over May 2014, the biggest yearly drop since the current statistical series began in 1996, the ministry said.
The surge in job creation was driven in part by seasonal employment needs at the start of the summer tourist boom.
The most noticeable drop in unemployment came in the services sector where jobless claims fell by 68,826 across Spain but it also fell in construction, industry and agriculture sectors and each of Spain's regions.
Spain has been on the road to economic recovery since mid 2013 when it emerged from its second recession since the start of the economic crisis five years earlier.
The figures demonstrated that the 16th consecutive month of improvement in the number of jobless when compared to the year before.
"What is really important is that every day we gain workers contributing to the social security system," Secretary of State for Social Security Tomás Burgos said in a statement from the ministry.
"We have seen 16 months of positive growth."
Prime Minister Mariano Rajoy has predicted that the country's economy to expand by 2.9 percent during 2015 and promised to create half a million jobs to drive down the unemployment rate from the current 24 percent to 22.1 percent by year end.
"There is still much to do. There are over four million Spaniards who still can't work," said Prime Minister Mariano Rajoy after the figures were released.
"The situation is not good but we have taken steps forward," he added.