Hillier aced the 187-yard par-three despite the mishit during Thursday's opening round at the Club de Campo Villa de Madrid and won a BMW iX5 SUV valued at 140,000 euros ($A225,000) .
The hole-in-one helped Hillier shoot a four-under 67 in the big European Tour event that left him tied for fourth place after Thursday's first round.
"It was pretty crazy," the 28-year-old from Wellington said.
"To be honest, I toed it quite a bit. Wasn't too happy with the strike. I was telling it to go the whole way, but it kind of hung in the air for a little bit longer than I thought. And then, yeah, heard some cheers."
Hillier said he didn't immediately know he had made the ace as his ball pitched pin-high and took one hop to the left before rolling in.
"Obviously, you can't see the bottom of the hole from the tee, so I saw everyone jump up at the back of the grandstand there," he said. "A little bit of disbelief for a while, but it's nice to see it go in."
Hillier, who won his national open in March just days after getting married, said he thought it was his fifth career hole-in-one.
"The year just keeps getting better," he said. "Hopefully, I can continue that for another couple of months."
The BMW was available only to the first player who made a hole-in-one on the hole this week.
"I didn't realise a car was on offer," Hillier said. "I've locked it up pretty early, but absolutely stoked and very grateful. It's going to be a long drive though to New Zealand, I know that much!"
Grant Forrest, Connor Syme and Eugenio Chacarra shared the lead after opening rounds of five-under 66, with Sergio Garcia among those one shot back in his home Open.
Jason Scrivener led the three-strong Australian contingent with a one-under 70 that left him tied for 21st, with David Micheluzzi shooting a 73 and Elvis Smylie 74.
