The assumption of the Habsburgs to becoming the head of an unified Spanish monarchy in 1516 was the culmination of the state-building policies of the Catholic Monarchs Ferdinand and Isabella. This 1469 dynastic union between Aragon and Castile ushered in a process of reform and centralization. Both Ferdinand II and Isabella I were consistent in their attempts to transform this dynastic alliance into a practical and lasting union between the two crowns. This meant that Ferdinand accepted his role as the junior partner to the wealthier Castile. The growth of royal authority in Castile led to a decrease in the relative autonomy of the nobility and municipalities and the power of the Castilian cortes declined. The Catholic Monarchs though did not just pursue a policy of absolutism, but rather sought to co-opt powerful institutions like the Church and recruiting a professional class of men to staff the Castilian government. In contrast, Aragon's various privileges remained relatively intact and its cortes retained more power vis-a-vis the monarch.
So when Charles V/I assumed his inheritance when Ferdinand II died in 1516, he also inherited the makings of a strong centralized monarchical state. This may not have been Ferdinand II's intention, but the death of his son John in 1497 and his sister Isabella in 1498 made his daughter Joanna of Castile his heir apparent. He had married her into the Habsburg family the year before John's death as part of the Trastámara's wider strategy of securing the dynasty's interests through strategic marriages. The problem was that Joanna's alleged mental instabilities meant that neither she nor her husband, a foreigner, were acceptable rulers of the two crowns. Ferdinand II would rule as Joanna's regent following her mother's death in 1504. Ferdinand II's regency actually allowed him to further expand the centralization and unification of the two crowns as there was a unitary executive. Charles V was to be co-ruler with his mother, but her mental issues precluded this. Ferdinand II had wanted Joanna's younger son and his grandfather's namesake to assume the Spanish crown as he saw Charles V as too foreign, but the German politics of the Habsburgs meant that Ferdinand became too involved in German affairs to make this a realistic possibility.
Although the Castilian grandees and the towns rebuffed Charles V's initial attempts to assert centralized royal authority during the Comunero Revolt the strength of Habsburg arms ended this revolt after some fighting. Charles V continued the Catholic Monarch's policies of co-option of elites and subordination of local interests to the centralized state. Like his Trastámara predecessors, Charles V was most successful in establishing authority in Castile. Because it was bolstered by American gold and the Habsburg's non-Iberian dominions, the Spanish state appeared more centralized and homogenous than it actually was. Although the Habsburgs enjoyed a degree of latitude in exercising power far greater than the Catholic Monarchs, they were still vulnerable to the centrifugal tendencies inherent in combining disparate regional patrimonies under the umbrella of a single dynasty. Some historians have characterized Spain as a composite monarchy rather than as an absolutist one. These composite monarchies required a political balancing act between recognizing local privileges and the needs of the central state. When Habsburg's overstepped their boundaries in the latter case, revolts against their authority could be quite severe such as the Catalan revolt in the seventeenth century.
Sources
Elliott, J. H. Imperial Spain, 1469-1716. New York: St. Martin's Press, 1964.
Lynch, John. Spain, 1516-1598: From Nation State to World Empire. Cambridge, USA: Blackwell, 1992.