"I am putting forward Mr Pedro Sanchez Castejon as candidate for prime minister," the king said in a statement read out by parliamentary speaker Patxi Lopez.
The country has been mired in uncertainty since December elections saw the incumbent conservative Popular Party (PP) win but without an absolute majority, leaving acting Prime Minister Mariano Rajoy struggling to form a government as other parties refused to support him.
But PSOE chief Pedro Sanchez has repeatedly rejected the idea.
After meeting the king earlier today, Sanchez said he had told the monarch he was willing to attempt what Rajoy has so far failed to do.
"I told the king that the Socialist party is willing... To try and form a government and drag Spanish democracy and institutions out of this deadlock," he told reporters in Madrid.
Sanchez stressed he was willing to speak to all political parties on the left and on the right, to create a "progressive" government.
But while Sanchez has welcomed the proposal, he has said the two parties need to first reach an agreement on a programme.
The formation of such a left-wing coalition government has been complicated by Podemos' backing for an independence referendum in the wealthy northeastern region of Catalonia, which Sanchez fiercely opposes.
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