Spain's announcement follows a decision in neighboring France to end the mandatory wearing of masks outdoors as infection rates fall, although concerns remain over the spread of the Delta variant.
"This weekend will be the last one with masks in outdoor spaces because the next weekend we will no longer wear them," Sanchez told an event in Barcelona.
He said the cabinet will meet on June 24 to approve the lifting of the mask-wearing rule from June 26.
Barring a few exceptions such as for exercising, mask wearing has been a legal requirement indoors and out across most of Spain, regardless of social-distancing, since last summer, for everybody older than six.
However, with infections dwindling and nearly half the population having received at one vaccine dose - including more than 90% of people over 50 - some regional authorities have been clamoring to ease the rule.
The nationwide infection rate as measured over the preceding 14 days fell to 96.6 cases per 100,000 people on Thursday, down from over 150 cases a month ago, while pressure on the health system has eased significantly since the beginning of the year.
Spain's 17 regions are largely responsible for managing healthcare, but major policy shifts must be proposed by the central government, in a system that frequently generates tension between administrations.
Last week the government was forced to backtrack on a plan to gradually reopen nightclubs after widespread complaints from regional authorities who dismissed it as either too strict or too loose.