Neither Sanchez nor any of the other party leaders currently enjoy the parliamentary support required for such an effort, the royal family said in a statement released late Tuesday after two days of consultations with political leaders.
If Sanchez fails to form a government by a Sept. 23 deadline, King Felipe will have to dissolve parliament and set Nov. 10 as the date for fresh elections, the fourth since 2015.
Sanchez has been in office since June last year, after his predecessor, Mariano Rajoy of the conservative People’s Party (PP), lost a vote of confidence.
He called early elections in February after Catalan separatists refused to back his budget.
While Sanchez’s centre-left PSOE won the elections held on April 28, it fell well short of an absolute majority.
At the end of July, the prime minister failed in an attempt to have parliament back his bid to govern at the head of a minority government.