In a surprise move, Spanish Prime Minister Pedro Sanchez called a snap election for July 23 on Monday, a day after his Socialists suffered a drubbing in local and regional polls.

Widely seen as a dress rehearsal for a general election that had been expected at the end of the year, Sunday's polls saw the main opposition Popular Party (PP) chalk up the largest number of votes.

The right-wing PP also scored significant gains at a regional level, seizing six regions that had been under Socialist control, including Valencia in the east and the Balearic Islands which includes the holiday island of Ibiza.

In a televised address, a sombre-sounding Sanchez said he had informed King Felipe VI of his decision to dissolve parliament and call a general election on July 23 "in light of the results of yesterday's elections".

"As the head of the government and of the Socialist party, I take responsibility for the results and I think it is necessary to respond and submit our democratic mandate to the popular will," he said.

The results "require a clarification from Spaniards about what policies the government should implement and which political forces should lead this phase," he added.

The snap election will take place some three weeks after Spain assumes the rotating presidency of the European Union, on July 1. (AFP)