Many immigrants from Latin America or African countries work in key sectors including agriculture, tourism and the service sector.
Spain's government finalised a migrant amnesty measure on Tuesday that it announced earlier this year, paving the way for hundreds of thousands of immigrants living and working without authorisation in the country to apply for legal status.
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The approach sharply differs from much of Europe's prevailing attitudes on immigration in which governments are trying to reduce the number of arrivals and step up deportations.
Prime Minister Pedro Sánchez hailed the measure as "an act of justice and a necessity."
He reiterated his government's position that people who already live and work in the country of 49 million people should "do so under equal conditions" and pay taxes.
"We recognise rights, but we also demand obligations," Sánchez wrote on social media.
An estimated 500,000 people living in Spain without authorisation could be eligible to apply, the government said.
Some analysts estimate up to 800,000 people live in the shadows of Spanish society.
Many immigrants from Latin America or African countries work in key sectors including agriculture, tourism and the service sector.
Those who meet certain conditions can now apply for a one-year residency and work permit, Migration Minister Elma Saiz said, adding that migrants could begin applying in person on 20 April and online on Thursday.
The amnesty measure was fast-tracked via a decree that amends immigration laws. By doing it thia way, Sánchez's government was able to bypass parliament, where a previous amnesty attempt stalled and where the government lacks a majority.
Saiz lauded the measure as a way that Spain, which has been among the fastest-growing European Union economies for two years, can continue to expand.
"Our prosperity is demonstrably linked to our management of migration and the contributions of foreign workers," she said. "Their contribution allows us to grow economically, generate employment and wealth and maintain our welfare system."
Immigrants must have arrived in Spain before 1 January and must prove that they have been living in the country for at least five months. That can be done by presenting "public or private" documents, Saiz said.
Applicants must also show that they have no criminal record, the government said.
Spain has granted amnesty to immigrants who are in the country illegally before, doing so six times between 1986 and 2005.