Eight workers at the brothel tested positive at the 'puti club' in Alcazar de San Juan, which is located in Ciudad Real in Castilla-La Mancha.
The women have all been isolated, while four contact tests have also been performed.
But The Olive Press reports that locals in the area fear many of the clients - not least married men - may want to keep their recent visits to the venue a secret.
Public Health of Castilla-La Mancha confirmed the outbreak, and noted the difficulty in tracking contacts as with all other cases.
A spokesman said: "We recall that the citizens of Alcázar de San Juan suffered greatly with the first wave of the pandemic and it is feared that the same story will be repeated.
"Therefore, all clients of the brothel are recommended to undergo tests to find out if they are infected or not."
According to The Mirror, local hospitals have called on any men who attended the club to 'show responsibility' and to come forward for testing, warning about the danger of the virus spreading.
Opposition councillor in the town, Andrea Fernández tweeted: "It is important to remember the high risk that runs not only the locality, but the entire community if not all those infected are detected in due time. For this reason, the hospitals of Alcázar call for prudence to prevent the virus from spreading like wildfire."
The news comes as Ciudad Real is the province with the most accumulated coronavirus cases since the virus broke out with a total of 7.722. It also has one of the highest death tolls with 1,122 deaths.
LADbible has reached out to Las Palmeras club for comment.
Spain has seen several clusters of Covid-19 break out in recent times after initially easing lockdown restrictions and welcoming tourists back.
Last week, the Spanish government even ordered all bars and nightclubs to close.
Speaking during a press conference, Spanish Health Minister Salvador Illa said it was vital businesses followed the new rules to help prevent the further spread of the deadly disease.
During the announcement, which was held following an emergency meeting with health officials from Spain's regions, Mr Illa said: "There has been a growing number of outbreaks in recent weeks.
"I am announcing that, for the first time, we have decided to adopt coordinated actions in terms of public health and that these measures have been adopted unanimously."
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