Here are some of my favorite literature pieces to teach. I have used these selections time and again for about twenty years. Most of these stories would be upper level high school or intermediate college level Spanish.
These first two selections are normally what I start out with if students have never read Spanish literature before. (NOTE: Many, but not all, of these selections can be found in Album.)
Signos de Puntuacion by Luis C. Infante - The story of how Sr. Alvarez's last will and testament gets interpreted. His will is written without punctuation. Each of his relatives or acquaintances punctuate his will to benefit themselves. Humorous. Great starter story because the bulk of the story is repeated (the will portion).
Una Carta a Dios by Gregorio Lopez y Fuentes - The humorous story of what happens when a Mexican farmer has complete faith in God and writes Him a letter. There are a lot of resources on the internet to supplement teaching this story as it is incredibly popular with Spanish teachers.
No Oyes Ladrar Los Perros by Juan Rulfo - A man tries to save his wayward son after he has been injured. Poignant and sad.
La Nocha Boca Arriba by Julio Cortazar - Another great story with a surprise ending. Two realities are presented: a human sacrifice and a motorcycle accident. The level of reading on this one is a little more advanced. I would save Julio Cortazar's work after students have had some experience in reading in Spanish. Other titles by Cortazar: Casa Tomada, Axolotl.
La Pared by Vicente Blasco Ibanez - A touching story of two families in Spain that overcome a feud when a fire breaks out in one of their homes. How tragedy can bring together enemies.
El Crimen Perfecto by Enrique Anderson Imbert - A story from an Argentine author about a man who believes that he has committed the perfect crime. Very humorous with a touch of fantasy.
Horacio Quiroga's short stories, A La Deriva and Las Medias de los Flamencos will give your students a taste of "The Poe of Latin America". Las Medias de los Flamencos is a more lighthearted story whereas A La Deriva is similar to some of the stories Edgar Allan Poe wrote. Teachers pay Teachers has a unit on Las Medias. Here is my packet on A La Deriva.