Spain exited recession in mid-2013 after five years of economic turbulence sparked by the collapse of a property bubble in 2008 which left millions of people out of work.
According to the INE National Statistics Institute, the number of people looking for work fell by 678,200 in 2015 to 4.78 million - the biggest drop it has ever registered - though it still remains the second-highest jobless rate in the eurozone after Greece.
The news will be a rare ray of sunshine for Spain's embattled acting Prime Minister Mariano Rajoy, who had forecast a higher 21.1 percent jobless rate for 2015.
Unemployment was a key issue in last year's election campaign, with Rajoy pointing to a drop in the number of job-seekers as evidence that his ruling conservative Popular Party (PP) had managed to steer the country away from economic collapse.
But his rivals all argued that the drastic spending cuts and tax rises he introduced led to damaging inequalities, adding that many of the jobs created were precarious and badly paid.
The PP won December general elections but fell short of an absolute majority, forcing Rajoy to try cobble together a government with rival parties that refuse to support him - creating a political deadlock.
According to the INE, those who got much-prized, long-term contracts rose by 170,600 over 2015 while people with more insecure, temporary work deals increased by 335,100.
Unemployment among the under-25s remains particularly high, at 46.2 percent.