Hundreds of onlookers applauded and chanted "Long live the king!" as the 76-year-old monarch, dressed in a brown military uniform, reviewed troops at Spain's annual armed forces day ceremony in central Madrid.
The king, who walks with a cane after multiple hip operations, was flanked by his wife Queen Sofia, and Felipe, who wore a white navy uniform, and his wife Princess Letizia, a former TV news reader.
Felipe, 46, ascends to the throne amid smoldering republican sentiment in a nation with a towering 26 per cent jobless rate which has fuelled growing discontent with the political elite.
Thousands took to the streets again yesterday, calling for a popular vote on whether it should be abolished.
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Many waved the red, yellow and purple Spanish republican flag and brandished placards reading: "No more kings, a referendum".
"I want to have the opportunity to vote to decide on my country's political system, whether it is a republic or a monarchy," said Oscar Hernandez, a 29-year-old teacher at the Madrid rally.
Among voters between the ages of 18 and 34, backing for a referendum rises to 74 per cent.
If such a vote was to be held, the poll found 49 per cent would prefer to have a monarchy with Felipe as king while 36 per cent would support a republic. The rest were undecided or declined to answer.
Spain only restored the monarchy in 1975 after the death of General Francisco Franco.