Rajoy said that he made the move to restore normality in the disputed region.
Simultaneously, Rajoy is also dismissing Catalan leader Carles Puigdemont and his cabinet.
The Spanish Prime Minister will elect a new government after a snap vote.
Following his decision, he told the media that Puigdemont let down the Catalonian people by holding an independence referendum.
The president [Carles Puigdemont] had the opportunity to return to legality and to call elections," Rajoy said.
"It is what the majority of the Catalonian people asked for - but he didn't want to do it. So the government of Spain is taking the necessary measures to return to legality," he added.
The vote brought to a head a weeks-long standoff with Madrid that began with a disputed referendum on October 1, and came as the Spanish Senate approved the Madrid government's unprecedented plans to seize control of the autonomous region, CNN reported.
According to the Catalan government, the October 1 election had almost 43 percent voters, out of which, at least 90 percent had voted in favour of independence.
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