Lawmakers voted 208 against 133 -- and one abstention -- to examine the bill, which was drafted by the ruling Socialist party.
In May, a similar proposal submitted by Catalonia's regional parliament was also admitted, but it only focused on legalising euthanasia.
This latest draft law also seeks to make euthanasia legal in public and private health services.
But it goes a step further by regulating it, laying out the conditions by which a person can apply to die.
It is the first time that bills aimed at legalising euthanasia make it past this first parliamentary hurdle after previous attempts failed.
"This regulation guarantees to protect the fundamental right to life, but also the recognition that it isn't an absolute right," Adriana Lastra, deputy head of the Socialist party, told parliament.
"It's a right that must be adjusted according to other values, including that of human dignity."
The draft law stipulates that a person can apply to die if he or she has a serious and terminal illness or suffers from a chronic, severe disability, and if they are Spanish or a legal resident in Spain.
The patient has to make his or her request by writing, free of any pressure, and repeat that demand after 15 days.
A person who can no longer take decisions but has previously given official instructions for the right to die will also be eligible.
Their doctor will then determine whether the patient meets these conditions and ask another physician who knows about the illness or disability to check this too.
Once these checks are done, the doctor will take the case to a regional evaluation and control commission which will give its final say.
For now, people with incurable diseases in Spain only have the option to refuse treatment.
In Europe, Euthanasia is legal in the Netherlands, Belgium and Luxembourg.
Other countries such as Switzerland allow assisted suicide, a practice that lets a doctor provide a patient with all the necessary lethal substances to end their life and leave them to carry out the final act.
Now that it has passed the first hurdle, the bill will go through various stages in parliament before it gets to the final voting stage in the lower house.