Pau Gasol led the way as hosts Spain handed Brazil their first defeat, winning 82-63 in Group A action in Granada on Monday.
Gasol - averaging the most points in the tournament thus far with 23.7 - had a game-high 26 points, nine rebounds and three blocks for Spain.
The NBA star also made three of five shots from beyond the arc in yet another dominant display, while Sergio Rodriguez chipped in with 12 points.
"It was the first opponent that we could measure our potential in the tournament. I am really pleased with the team game," Gasol said.
Wins over Brazil, Iran and Egypt has Spain as the only undefeated team in Group A after three games.
Brazil, who were led by Leandro Barbosa's 11 points, boast a 2-1 record, identical to that of France and Serbia following their respective victories on Monday.
France - the 2013 European champions - barely raised a sweat as they crushed winless Egypt 94-55.
Joffrey Lauvergne posted 12 points and seven rebounds for the French, while Thomas Heurtel had eight assists.
As for Serbia, they overcame lowly Iran 83-70.
Giant centre Hamed Haddadi put on a show with a game-high 29 points but it could not prevent Iran from slumping to a third consecutive loss.
Nemanja Bjelica had a team-high 18 points for Serbia.
In Group B, Greece also qualified for the round of 16 thanks to a 90-79 win against Puerto Rico.
Kostas Kaimakoglou had nine points and 11 rebounds as the Greeks sealed a third successive win.
Surprise packets Senegal also continued their good form, edging Croatia 77-75.
Gorgui Dieng finished with 27 points, eight rebounds and two blocks as Senegal improved to 2-1 alongside Croatia and Argentina, who were also victorious.
Argentina returned to winning ways with a narrow 85-81 win over the Philippines.