People used hoses to wash down the dust in the centre of the capital where a brown film covered windows in apartment buildings.
Haze created by the hot air is driven across the Mediterranean Sea by powerful winds called "la calima". The phenomenon is common in Spain, and especially the Canary Islands, off Morocco.
But the latest episode was "extraordinary", greatly reducing visibility over swathes of the country, said Ruben del Campo, spokesman for the state weather agency AEMET.
Cities from Granada in the south, Madrid in the centre and Leon in the northeast, were affected.
Dust was forecast to continue to arrive in "large quantities" during Tuesday and Wednesday and later reach up to the Netherlands and Germany, the spokesman said.
Air quality in Madrid and the nearby cities of Segovia and Avila was "extremely unfavourable", according to local authorities.
Storms in the Sahara create ground wind gusts which lift sand and dust into the air, the weather office said in a video posted on Twitter.
The smaller particles are suspended in the air due to the temperature difference between the ground and the hot air above. The wind then blows the particles north.
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