"The cabinet has agreed to require formally to the Catalan government to confirm whether it has declared or not independence", Rajoy said in a televised address on Wednesday as cited by Reuters.
The semi-autonomous region of Catalonia, which has its own language and culture, held a referendum on independence on October 1. Triggering Article 155 would allow Rajoy to suspend Catalonia's devolved government and take over control from Madrid.
Catalonian President Carles Fulgedemont subsequently hinted he would unveil an American-style declaration of independence, but on Tuesday backed down and instead endorsed negotiations.
Spanish deputy prime minister Soraya Saenz de Santamaria said the Catalan leader "doesn't know where he is, where he is going and with whom he wants to go".
The Catalan parliament approved an independence referendum which went ahead on 1 October despite being suspended by Spain's Constitutional Court.
Spain's political establishment rounded on Puigdemont following the declaration, and support among separatists in Catalonia was mixed.
Barcelona resident Maria Rosa Bertran said she was against a delayed secession, which meant "suffering a longer agony".
"There is no mediation possible between democratic law and disobedience, illegality", he told parliament.
She said Mr Puigdemont had put Catalonia "in the greatest level of uncertainty seen yet".
"The answer from the Catalan president will determine future events, in the next few days", he also said, adding he would keep acting in a "cautious and responsible" way.
Demands for independence in Catalonia, one of Spain's 17 semi-autonomous regions which has its own language and cultural traditions, date back centuries.
"I assume ... the mandate that Catalonia become an independent state in the form of a republic", he said to prolonged applause. "My arrest would be unjustified and a mistake; this is not the moment to send people with whom you have political discrepancies to prison."Puigdemont said it was an important time for both sides to enter into dialogue."We are at a point where the most important thing that there is no previous condition to sit down and talk, to accept that we have to talk, we need to talk in the right conditions", he said".
Catalonia is relatively wealthy, and the loss of the region would be a blow to the Spanish economy.
A string of companies have already moved their legal headquarters - but not their employees - from Catalonia to other parts of the country.