Members of the “Hogar Social” group attempted to interrupt a protest in support of refugees in Madrid on Sunday.
Liberal activists were demonstrating against an EU-Turkey deal which came into effect last year.
Under the agreement, migrants arriving in Greece are deported back to Turkey if they do not apply for asylum or their claim is rejected.
In the astonishing video, members of the far-right group wave Syrian flags, brandishing a sign which translates: “Making Spain poorer while Syria bleeds.”
A woman, wearing an orange boiler suit similar to those seen worn by an Isis prisoner, can be seen on her knees with a man, depicting a Jihadi fighter, standing behind resting a huge knife against her neck.
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Mocking the German chancellor’s open door policy, one Hogar Social group member could be seen facing the pro-refugee crowd dressed as Angela Merkel.
As the two groups stand-off, police later intervened in a bid to deter any confrontation.
The far-right group, consisting of about 30 people, were led away by officers. There are no reports of any arrests.
Since 2015, Spain has taken in over 1,100 refugees fleeing war-torn Syria.
Earlier this month, some 160,000 people took to the streets of Barcelona demanding more were allowed in.
The mass-protest was sparked as the Spanish government was accused of not honouring its promise to accept 17,000 refugees over a two-year period.
Spanish authorities have struggled to stem the flow migrants travelling from the coast of Africa to the enclave of Ceuta.
A five-mile long fence, topped with razor-sharp barbed wire, is often cutting by migrants as they desperately try to enter from Morocco.
Ceuta and another Spanish enclave on the African coast, Melilla, are the EU’s only land border with Africa.
They are flash points for migrants trying to find a way into the EU.