In a televised address after an emergency cabinet meeting, Prime Minister Mariano Rajoy said he had also removed secessionist Catalan leader Carles Puigdemont and his executive.
Rajoy moved swiftly after the Senate gave his government sweeping powers to impose direct rule on the semi-autonomous region to quash its drive to break away from Spain.
He called for regional elections on December 21 as part of efforts to "restore normality" after the vote in the Catalan parliament plunged Spain into uncharted waters.
After a months-long standoff with Madrid, regional lawmakers voted 70 to 10 in the 135-member parliament to declare Catalonia "a republic in the form of an independent and sovereign state".
Demonstrators in Barcelona broke out in ecstatic shouts of: "Independence!" as the result was announced, while separatist MPs cheered, clapped and embraced before breaking out in the Catalan anthem.
But any cause for joy was soon nipped in the bud with Rajoy's announcement.
"We Spaniards are living through a sad day in which a lack of reason prevailed upon the law and demolished democracy in Catalonia," he said.
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