The results mirror Spain's last general election six months ago when no party obtained a majority.
To be able to governm, a party must secure 176 seats in Spain's 350-seat Parliament.
The Popular Party on Sunday took 137 seats, securing the most votes in all but two of Spain's political regions and gaining 14 lawmakers in the lower chamber compared to the Dec. 20, 2015 election.
"You have won the elections because you have pursued your faith in victory," Rajoy told supporters in a victory speech. Rajoy said that the Popular Party had "reclaimed the right to govern."
The Socialist party took the second largest share of votes with 85 seats, but in a shock result lost its traditional strongholds of Andalusia and Extremadura to the Popular Party as well as dropping 5 seats.
Socialist leader Pedro Sanchez blamed Unidos Podemos (United We Can) leader, Pablo Iglesias, for the Popular Party's gains, citing "intransigence" and "personal interest."
Unidos Podemos, a coalition of far-left parties, secured 71 seats.
Iglesias and his campaign strategist Inigo Errejon both expressed disappointment with the results, adding however that Unidos Podemos will continue pursuing its program and that the party "is here to stay."
Unidos Podemos was a newcomer party in the Dec. 20 election and declined Sanchez's invitation to form a coalition government with the centrist Ciudadanos (Citizens') party, forcing a repeat election.
Unidos Podemos, however, were the only party other than the conservatives to obtain regional majorities _ retaining northeastern Catalonia and gaining the northern Basque country.
Ciudadanos came fourth, taking 32 seats, a seven seat drop since the previous election.
Candidates will once again have to negotiate with other parties to form a coalition government.
Unidos Podemos hinted at a possible coalition with the Socialists. However, this would not secure a parliamentary majority.
The results largely mirror Spain's last general election.
In the months following that vote politicians failed to come to a coalition agreements, forcing King Felipe VI to dissolve parliament and call a new election for June 26.
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