The king signed the decree in the presence of parliament speaker Patxi Lopez after a midnight deadline for installing a new government passed following inconclusive December 20th elections.
It is the first time that Spain will repeat elections since the country returned to democracy following the death of long-time dictator General Francisco Franco in 1975.
"It is the first time that this has happened in the democratic era because we were unable to fulfill the mandate citizens gave us", Lopez told reporters.
December's vote put an end to Spain's traditional two-party system as voters fed up with austerity, unemployment and corruption scandals flocked to new groups, resulting in a hung parliament.
Spain has never had a coalition government and parties tried in vain since the polls to cobble together an alliance which had enough support to be able to pass a parliamentary vote of confidence.
Much of the negotiations had centred around left-wing parties after Prime Minister Mariano Rajoy - whose conservative Popular Party (PP) won the December election but lost its majority - gave up trying to form a government for lack of support.
The Socialists (PSOE) - who came second in the polls with just 90 parliamentary seats out of 350 - were tasked by the king to try and bring other parties together in a coalition, but ultimately failed.
Polls suggest fresh elections may not break the political stalemate, with the results likely to be similar to those of December, which left power divided among four main groupings.
Analysts say parties will likely be more willing to compromise after fresh polls as voters will be impatient for a government to be formed.