Catalonia's secession crisis, meanwhile, had little impact on employment as had initially been feared, official statistics showed.
The country's unemployment rate stood at 16.5 percent at the end of last year, in line with government expectations, up slightly from the third quarter when it was 16.4 percent, according to the National Statistics Institute.
But it is sharply down from the end of 2016, when it stood at 18.6 percent, benefitting in particular from a record year for tourism in Spain, which is set to overtake the United States as the world's number two destination.
Over the year, the services sector saw the most jobs created at close to 290,000.
But posts in that sector, and particularly in tourism, are often temporary -- and critics point to the fact that many jobs created in Spain are unstable.
"Unemployment is dropping but the quality of jobs continues to be below minimum," Pepe Alvarez, head of Spain's UGT union, told Spanish television.
The number of temporary contracts at the end of the year had increased 4.4 percent compared to the same time in 2016, while the number of contracts for long-term jobs increased by 3.2 percent.
Generally speaking, unemployment in Spain is still sky-high, around double that of the eurozone -- 8.7 percent in November, according to the latest EU statistics.
Spain has the highest unemployment rate in the eurozone after Greece.
In Catalonia, where the government warned the secession crisis could affect jobs, unemployment rose very slightly in the fourth quarter of 2017, when separatist leaders tried to break from Spain.
At the same time, however, the jobless queue also lengthened more noticeably in the region of Madrid, which like Catalonia is one of Spain's wealthiest, hitting 13.7 percent after 12.3 percent in the third quarter.
And over the year, Catalonia was one of the three regions in Spain where unemployment fell the most.