Catalan lawmakers easily approved the move amid an opposition boycott.
PM Mariano Rajoy had told senators direct rule was needed to return “law, democracy and stability” to Catalonia.
The crisis began on October 1, when Catalonia held a controversial referendum on independence.
The Catalan government said that of the 43% of potential voters who took part, 90% were in favor of independence. However, Spain’s Constitutional Court had ruled the vote illegal.
A motion declaring independence was approved on Friday with 70 in favor, 10 against, and two abstentions in the 135-seat chamber.
The measure calls for the transfer of legal powers from Spain to an independent Catalonia.
However, the Constitutional Court is likely to declare it illegal, while the US, UK, Germany and France all expressed support for Spanish unity.
European Commission chief Jean-Claude Juncker said the EU “doesn’t need any more cracks, more splits”.
Catalonia’s President Carles Puigdemont has called for supporters to “maintain the momentum” in a peaceful manner.
Crowds have been celebrating the declaration of independence and Spanish flags have been removed from some regional government buildings in Catalonia.
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