US President Donald Trump has been pressuring allies to commit to that target when they meet for the two-day starting on Tuesday in The Hague.

Spain had been the last holdout on a compromise deal that sees allies promise to reach 3.5 percent on core military needs over the next decade, and spend 1.5 percent on a looser category of "defence-related" expenditures such as infrastructure and cybersecurity.

Multiple diplomats at NATO said the agreement had gone through with the approval of all 32 nations and that there was no exemption for Madrid.

But within minutes Sanchez came out saying he had struck an accord with NATO that would see his country keep respecting its commitments "without having to raise our defence spending to five percent of gross domestic product".

The claim from Madrid came after Sanchez on Thursday threw a last-minute grenade into preparations for the gathering in the Netherlands by taking a strong stand against the agreement.

In a blistering letter to NATO chief Mark Rutte, Sanchez said that committing to a headline figure of five percent of GDP "would not only be unreasonable, but also counterproductive".

The outburst from Madrid's centre-left leader sparked fury from other NATO members who feared it could derail the carefully crafted compromise.

The pledge is seen as key to satisfying Trump, who has long accused allies of not spending enough, and central to helping NATO build up the forces it needs to deter Russia.

After several days of wrangling involving Sanchez and Rutte, officials said Spain on Sunday signed off on the pledge.

Diplomats said that language around the spending pledge in the summit's final declaration had been slightly softened from "we commit", to "allies commit".

But they said the fundamentals of the deal remained intact.

Spain has been one of the lowest-spending NATO countries on defence in relative terms.

The country is only set to hit the alliance's current target of two percent this year after a 10-billion-euro ($11.5 billion) injection.

Sanchez is facing a difficult balancing act of aligning with NATO allies and cajoling his junior coalition partner, the far-left alliance Sumar, which is hostile to increasing military spending.