From 1982 until 1996, the social democratic PSOE governed the country, with Felipe González as prime minister. In 1986, Spain joined the European Economic Community (EEC, now European Union), and the country hosted the 1992 Barcelona Olympics and Seville Expo '92.

In 1996, the centre-right Partido Popular government came to power, led by José María Aznar. On 1 January 1999, Spain exchanged the peseta for the new Euro currency. The peseta continued to be used for cash transactions until January 1, 2002. On 11 March 2004 a number of terrorist bombs exploded on busy commuter trains in Madrid during the morning rush-hour days before the general election, killing 191 persons and injuring thousands. Although José María Aznar and his ministers were quick to accuse ETA of the atrocity, soon afterwards it became apparent that the bombing was the work of an extremist Islamic group linked to Al-Qaeda. Many people believe that the fact that qualified commentators abroad were beginning to doubt the official Spanish version the very same day of the attacks while the government insisted on ETA's implication directly influenced the results of the election. Opinion polls at the time show that the difference between the two main contenders had been too close to make any accurate prediction as to the outcome of the elections. The election, held three days after the attacks, was won by the PSOE, and José Luis Rodríguez Zapatero replaced Aznar as prime minister.

On 3 July 2005, the country became the first country in the world to give full marriage and adoption rights to homosexual couples (Belgium has allowed same-sex marriage since 2003 and co-parenting since April 2006, and the Netherlands has allowed same-sex marriage since 2001 and now has a law in preparation to provide full adoption rights in equal conditions to opposite-sex marriages).

At present, Spain is a constitutional monarchy, and comprises 17 autonomous communities (Andalucía, Aragón, Asturias, Islas Baleares, Islas Canarias, Cantabria, Castile and León, Castile-La Mancha, Cataluña, Extremadura, Galicia, La Rioja, Community of Madrid, Region of Murcia, País Vasco, Comunidad Valenciana, Navarra) and two autonomous cities (Ceuta and Melilla).