Princess Letizia, the future Queen of Spain, has given birth to her first child, a baby girl named Leonor.
Felipe said the birth was 'something exceptional'
Crown Prince Felipe, 37, described the birth as "the most wonderful thing that could happen to anyone".
Leonor is second-in-line to the throne after her father but, under the Spanish constitution, she would be succeeded by any future male sibling.
Spain's government says it wants to change the law so that females have the same succession rights as males.
Leonor was born at 0146 (0046 GMT) at Madrid's Ruber International Clinic, three weeks before her due date.
She was born by Caesarean section and weighed 7lb 13oz (3.54kg), doctors said.
Prince Felipe accompanied his wife to the clinic and, after the birth, emerged to speak to the 100 or so journalists and bystanders who had gathered outside.
"I was by her side and the moment I saw our daughter being born was something exceptional," he said.
He added that the birth "secures the succession and is a significant event both politically and constitutionally".
Spanish Prime Minister Jose Luis Rodriguez Zapatero has pledged to change the law, saying it discriminates against female royals.
Prince Felipe married Letizia Ortiz, 32, in May 2004 - shortly after the Madrid train bombings.
The crown prince's romance with Ms Ortiz, a well-known television presenter and a divorcee, had been kept a secret.