The abdication announcement came as the monarchy is entrenched in scandal, the economy of Spain is suffering with massive unemployment and regional separatism continues to persist in the country.
"His Majesty, King Juan Carlos, has just communicated to me his will to give up the throne," announced Rajoy at the press conference. "I'm convinced this is the best moment for change."
The King's popularity dropped in 2012 when Spaniards became furious that their monarch was traveling on an African safari while the country was in the throes of economic chaos. The trip was only revealed because the King broke his hip and he apologized after his extravagance was revealed. His daughter, Princess Christina, has also been under investigation for corruption.
Despite his frail health and 55 percent of Spain favoring abdication, the king has been resisting stepping down according to sources close to the royals. He will hand over the reins to his son, who has a much higher approval rating, who will soon become King Felipe IV. Felipe has a law degree from Madrid's Autonomous University and a master's degree in international relations from Georgetown University in Washington, D.C.
The King addressed the nation after Rajoy's announcement.
"The time has come for a younger generation to take over," said Juan Carlos. "The long and deep economic crisis has left social scars in the country, but is also showing the way forward, one full of hope."
"Today a new generation must be at the forefront" he added. He also said that "young people with new energies should undertake the reforms that the present juncture demands of us."
There is no clear timeline on when the transfer of the throne will take place, but the King did say he resolved to step down in January.
Notable deaths of 2014 [PHOTOS]