Police arrested 57 people across the country as part of the operation, including a Chinese couple suspected of running the ring, police said in a statement.
The authorities suspect Chinese nationals living illegally in Barcelona paid the ring around 8,000 euros ($9,000) for fake domestic work contracts with employers in the holiday island of Lanzarote, allowing them to obtain residency permits.
"They would return to Barcelona once they obtained a residency permit to work in the textile sector, without ever carrying out job they were hired for," the statement said.
The ring allegedly paid employers, usually hotels in Lanzarote, 1,500-2,000euros for each fake work contract they provided a Chinese national.
A police spokeswoman could not say how many Chinese nationals obtained residency permits through the scheme, saying only that the ring was "very important".
Just under 200,000 Chinese nationals legally live in Spain, making the Chinese immigrant population the fourth largest foreign community in the country, according to national statistics institute INE.