The 76-year-old monarch said he would hand over the crown to his son Prince Felipe, 46, hoping to revitalize the palace and the country after years of scandal and recession.
Felipe, a tall former Olympic yachtsman, will take the throne with his wife Letizia, a glamorous 41-year-old former newsreader who will be Spain’s first “commoner” queen.
An act of parliament is needed to bring Juan Carlos’ abdication into force.
Prime Minister Mariano Rajoy called a cabinet meeting for Tuesday to draw up the required legislation.
Rajoy said he hoped Felipe would be proclaimed king “very soon.”
Crowned in November 1975 after the death of General Francisco Franco, Juan Carlos won wide respect for his role in building modern Spain.
But a corruption scandal struck his family in 2011 at the height of an economic crisis and undermined his popularity.
The following year he sparked fresh outrage by hunting elephants in Botswana while ordinary Spaniards struggled through a recession.
Years of economic crisis “have awakened in us a desire for renewal, to overcome and correct mistakes and open the way to a decidedly better future,” the king said in a televised address.
|Spain’s Prince Felipe and King Juan Carlos salute during a ceremony in Madrid in January 2012. (AFP-Yonhap)|
“Today a younger generation deserves to step into the front line, with new energies,” said the monarch, looking relaxed in a grey suit and green tie.
“For all these reasons ... I have decided to end my reign and abdicate the crown of Spain.”
The future king, who will be crowned Felipe VI, “has the maturity, the readiness and the sense of responsibility needed to take on the leadership of the state and open a new phase of hope,” Juan Carlos said.
Experts warned Felipe has a tough job ahead of him to unite a country suffering from a recession that ended last year, with an unemployment rate still close to 26 percent.
A corruption scandal implicating the king’s youngest daughter Cristina and her husband Inaki Urdangarin has plunged the palace into a crisis of its own.
“It is a very difficult moment to come to the throne,” said Jose Apezarana, author of several books on the royals.
“We have a country that is in an economic crisis and the Urdangarin case has not yet been resolved,” he said.
“The Urdangarin case is from now on going to wear down Felipe, not Juan Carlos.”
Felipe’s accession looked like a fresh start to passers-by in the streets of Madrid Monday, who agreed it was time for the king to step aside.
“It was something that clearly had to happen,” said Maria Jose Gonzalez, 55. “The king is elderly. Felipe is very prepared and will do very well.”
In a study by pollster Sigma Dos in January, support for the king fell to 41 percent while those wanting him to abdicate in favor of Felipe surged to 62 percent.
Some would prefer no king at all, however. Twitter buzzed on Monday with irreverent messages about Juan Carlos and calls for a referendum on the monarchy.
“I would like for us Spanish people to be able to choose whether we want a monarchy or a republic. The monarchy is obsolete,” Alejandro Ricas, a 19-year-old student, said.
Protests took place on Monday evening with republicans taking to the streets calling for a referendum and the abolition of the monarchy.
Juan Carlos shaped Spain’s modern history after taking the throne as the dictator Franco’s appointed successor.
Defying Franco’s supporters, he oversaw the creation of a parliamentary monarchy, with a new constitution approved by referendum in 1978.
He was credited with seeing off an attempted coup in February 1981 when soldiers stormed into parliament shooting and held lawmakers hostage.
But he was undermined late in his reign by the elephant safari and above all the scandal centered on Urdangarin’s business affairs, which has dragged in Cristina.
His ailing health also raised questions about his future. Between May 2010 and November 2013, he had surgery nine times, including five hip operations.
Spanish newspapers marked the exceptional news on Monday by printing special afternoon editions.
“A necessary king,” leading center-left daily El Pais headlined its editorial.
“Prince Felipe will now have to win the confidence of Spaniards, building on qualities shown by his father and facilitating the modernization that Spain urgently needs,” it wrote.
Center-right El Mundo hailed Felipe as “the best change for a worn-out monarchy,” for a Spain “at a crossroads” due to corruption, separatist pressures in Catalonia and political turbulence.
“If Juan Carlos had to invent a modern parliamentary monarchy in Spain in 1975, Felipe will have to reinvent it,” it wrote.
Juan Carlos was the third European monarch of his generation to abdicate in just over a year, after King Albert II of Belgium in July and Queen Beatrix of the Netherlands in April 2013.