Pedro Almodovar's latest film Volver has been chosen to represent Spain in the foreign language category at next year's Oscars.
Almodovar and Cruz have worked on several films together
The Spanish Film Academy's choice will be submitted to an Oscars committee along with other overseas films.
Then five finalists will be chosen for the best foreign language film prize.
Last year, Almodovar, 54, quit the Spanish Film Academy in a row over voting procedures and how Spain's candidate for the Oscars was chosen.
"I am extremely happy. Of course we have the possibility of winning," the film-maker told the AFP news agency.
Volver tells the story of a mother, played by Penelope Cruz, whose own mother returns from the dead.
The film was chosen by the Spanish Film Academy over Agustin Diaz Yanes' Alatriste and Salvador by Manuel Huerga.
Almodovar was recently awarded the best film of the year award at the 54th San Sebastian film festival in the northern Basque city.
At this year's Cannes film festival in May, Volver won best screenplay and the best actress award for all six actresses in the cast.
Almodovar is widely regarded as one of Spain's most celebrated film directors.
Oscar voters have honoured him twice, naming All About My Mother best foreign film in 2000, and Talk To Her best original screenplay two years later.