Spain announced yesterday that it had cancelled a contract which would see Saudi Arabia buy €9.2 million ($10.6 million) of weapons from Madrid, Eldiario newspaper reported.
Some 400 high-precision bombs were to be supplied under the deal which was signed by the government of former prime minister Mariano Rajoy.
Madrid must now reimburse Saudi for payments already made for the arms.
The decision comes following a Saudi air strike which hit a school bus and killed nearly 40 children in early August.
Spain’s new government has said all arms sales must comply with strict security criteria which include insuring weapons are not used in any other country except the one they are destined for.
Riyadh is leading a coalition of Arab states which began launching air strikes in Yemen in March 2015 to restore to power internationally backed President Abd Rabbuh Mansur Hadi, who was driven from the capital in 2014 by Houthi fighters and militias allied with former President Ali Abdullah Saleh.
Last week UN human rights experts said some Saudi-led coalition air strikes in Yemen have caused heavy civilian casualties and may amount to war crimes.