But the rate is still the highest in the eurozone after Greece's and unemployment is a top voter concern as conservative Prime Minister Mariano Rajoy prepares for a tight general election on December 20th.
In the busy July to September tourism period, when many Spanish companies take on new staff, the unemployment rate was 21.18 percent, down from 22.37 percent in the previous quarter, the National Statistics Institute said.
The number of people looking for work in Spain fell by 298,200 in the third quarter over the previous quarter to 4.85 million. its lowest level since the second quarter of 2011.
"It is without a doubt a positive number, encouraging, but it also shows that there is still a lot to do," Economy Minister Luis de Guindos said during an interview with radio Cadena Ser.
The jobless rate among the under-25s remained extremely high at 46.6 percent and there were 1.57 million families with all working-age members unemployed.
Spain attracted a record 54.3 million during the first nine month, a 3.8 percent increase over the same time last year, the tourism ministry said on Thursday, setting the country up for its best-ever year for tourism and giving the economy a boost.
Spain emerged in 2013 from five years of on-off recession and the government forecasts the economy will grow by 3.3 percent this year - more than twice the average forecast for eurozone countries.
Rajoy credits new rules adopted in 2012 for making it cheaper for firms to lay off workers and limiting the power of unions to negotiate collective-bargaining agreements across entire industries or regions for the recovery.
But the reforms have cost him voter support. The ruling Popular Party secured an absolute majority four years ago but polls show it is running neck and neck with the main opposition Socialist party.