However, opposition officials say any tarnishing of Spain's image is being done by the conduct Rajoy's Popular Party, the BBC reported Thursday.
Rajoy, who so far has rejected calls to step down, appeared in Parliament to address claims illegal payments were made from a slush fund operated by Louis Barcenas, the Popular Party's former treasurer who is in custody while being investigated on other corruption allegations
Rajoy told lawmakers he was appearing before them to dispute the "lies, manipulations and malicious insinuations encouraged by certain political leaders" concerning the scandal that has been around since 2009.
While Spain's economy was beginning to emerge from years of crisis, Rajoy voiced concern that continued focus on the scandal was damaging Spain's image, the BBC said.
He also admitted he erred by trusting Barcenas, "someone who we now know did not deserve it."
Rajoy ended his remarks by saying measures would be implemented to strengthen anti-corruption safeguards.
The leader of the country's main opposition Socialist Party, Alfredo Perez Rubalcaba, said Rajoy was not in the chamber to debate the state of the Spanish economy and that the prime minister's "resistance" to address Parliament's concerns was the root of any damage to Spain's image.
Rubalcaba said Rajoy's party won elections for the past 20 years because of a system of illegal financing, the BBC said.
"You must go, Mr. Rajoy," he said.
The scandal erupted during a 2009 judicial investigation into corrupt payments involving members of the Popular Party.
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