Spain's intelligence service CNI had court approval to spy on Catalan separatist figures, AFP reported on Tuesday, citing the El Pais newspaper.
The spying targeted selected individuals and was not "massive" as alleged, said unnamed sources cited by the paper.
Last week, Canada's Citizen Lab group said that at least 65 people linked to the Catalan separatist movement had been targets of Pegasus spyware, developed by Israeli company NSO Group, after a failed independence bid in 2017.
Elected officials, including current and former Catalan regional leaders, were among those targeted by the controversial spyware, it said.
Citizen Lab, which focuses on high-tech human rights abuses, said it could not directly attribute the spying operations, but that circumstantial evidence pointed to Spanish authorities.
But the intelligence service sources cited by El Pais said the number of Catalan separatists who were spied on was "much lower" than Citizen Lab's figure, and the CNI "always acted under the control of the courts".
The Spanish government last week categorically denied illegally spying on Catalan separatists. On Sunday, Spain's central government said it would launch inquiries.
The report is the latest in a series of reports linking Pegasus to abuses by governments.
In February, the Finnish foreign ministry said it had detected Pegasus in several phones used by its diplomats abroad.
The Finnish announcement followed a report in The New York Times which said that former Prime Minister Benjamin Netanyahu worked to ensure that Saudi Arabia would be able to use the Pegasus software, around the time that the Abraham Accords were signed with the United Arab Emirates (UAE).
Earlier this month, digital-rights researchers said that the mobile phones of four Jordanian human rights activists were hacked over a two-year period with Pegasus. Jordan denied the allegations.
The US Commerce Department recently blacklisted NSO Group, prohibiting it from using American technology in its operations.
Apple sued the Israeli firm in late November, seeking a permanent injunction to ban NSO Group from using Apple software, services, or devices.