They arrested 57 people in Barcelona, Valencia, San Sebastian and Las Palmas in the Canary Islands.
Chinese nationals illegally living in Spain reportedly paid the ring €8,000 ($8,960; £6,820) each to obtain fake contracts as domestic workers.
In return they were given residency permits to work in Barcelona.
"They would return to Barcelona once they obtained a residency permit to work in the textile sector, without ever carrying out the job they were hired for," a Spanish police statement said.
The ringleaders, a Chinese couple,  allegedly paid employers between €1,500 and €2,000 for the contracts.
Most of the employers allegedly involved are linked to the hotel trade in Lanzarote, one of the Canary Islands.
Chinese immigrants are the fifth biggest foreign community in Spain with almost 170,000 people as of 2015, according to the National Statistics Institute.

The skull of an adult male was found by the M54 slip road on Thursday by workers surveying a roundabout near Telford.
The find sparked a West Mercia Police inquiry and led to the discovery of "further skeletal remains".
The remains have now been recovered and post-mortem tests on Tuesday will help to identify him, police said.
Officers said the remains had been there for at least two years.
Police have contacted neighbouring forces asking for information about people who had been reported missing.

A spokesman said both men were in their 60s, but gave no further details.
The men reportedly ran into bad weather as they were coming down the mountain over the weekend.
Last week, the remains of two Japanese climbers who disappeared 45 years ago were found on the Matterhorn, one of Europe's highest mountains.
DNA tests helped identify those remains - the latest to have been discovered with the melting of ice on the mountain.
The 4,478m (14,700ft) Matterhorn has a distinctive pyramid-shaped peak, making it one of the world's most recognisable mountains.
Hundreds of people have died trying to reach the top.

Kevin Paddick, 34, of Rosemary Road, Clacton, Essex, is accused of killing Danny Myers, 23, from Enfield.
Mr Myers died in hospital after he was stabbed at an address in Rochford Road, St Osyth, in the early hours of Monday.
The accused is expected to appear before magistrates later. A 29-year-old woman from Clacton, who was arrested on suspicion of murder, has been released without charge.

A rare magnitude-four earthquake hit Greenland's west coast on Sunday, producing a surge of water that swept away homes and led to reports of a number of people missing.
Joint Arctic Command, the group tasked with the search and rescue mission, has since published images of the aftermath of the disaster and told the BBC that it continues to monitor the situation, warning that further incidents could take place.
Homes were submerged and washed away after a tsunami hit the village of Nuugaatsiaq, north-western Greenland.
Rescuers used liferafts to sweep the area after four people were reported missing.
A number of injuries were also reported after 39 people were evacuated from Nuugaatsiaq.
The surge of water is believed to have swept away 11 homes in the small village.
The authorities said the tsunami was caused by a magnitude-four earthquake, which is rare for the area.
Police chief BjÃ¸rn Tegner Bay said he was unable to confirm whether there had been fatalities.
Meteorologists said it was "not normal" for such an earthquake to hit Greenland and warned of aftershocks.
Spanish police say they have dismantled a nationwide network that illegally regularised the working status of Chinese immigrants in Spain.
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A post-mortem examination is to take place on human remains found near a motorway slip road in Shropshire.
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Two Japanese climbers who scaled the Matterhorn in the Swiss Alps have been found dead on the mountain, according to the Japanese foreign ministry.
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A man has been charged with murdering a man who was stabbed to death.
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Greenland profile