Ibiza, Mallorca and Menorca could be at risk of going back on the amber list, just weeks before schools close for the summer holidays.
The Balearic Islands have been among the most popular holiday destinations on the green list where returning Britons do not have to self-isolate.
But cases have tripled in Spain in just two weeks to 368 cases per 100,000 people, with more than 21,000 new cases on July 9.
While Mallorca and Menorca are also said to be experiencing a rise in cases.
The island is currently reporting 258 cases per 100,000 people, according to Cercle d’Economia de Mallorca.
After a rise in coronavirus case numbers, it has been claimed the three destinations could end up back on the amber list.
A source told the Sun: “It’s all still up for discussion, but the figures aren’t great which is why it was on the watch list in the first place.”
This would mean unvaccinated Britons returning from Ibiza, Mallorca and Menorca will have to isolate for 10 days and take a Covid-19 test on or before day two and on or after day eight.
Under new rules set to come into force on Freedom Day July 19, fully vaccinated travellers from amber list countries will not have to self-isolate but they will still be required to get tested.
The news of the potential downgrade comes just weeks after the holiday destinations were added to the green list, prompting hope families could getaway for the summer holidays.
The Government’s travel lists are expected to be updated on Thursday, although reports have suggested it could come slightly earlier.
If the Island is moved to the amber list, this could impact young people who have not yet been vaccinated.
It was just last month those aged 18 and over queued for hours to get their first Covid-19 vaccine.
But those still waiting to get their second dose could have their summer holiday plans ruined.
People arriving in the UK from a red-list location must spend 11 nights at a quarantine hotel, at a cost of £1,750 for solo travellers.
It comes as a couple were barred from making a trip to Malta due to having been given an Indian-made batch of the Oxford/AstraZeneca vaccine, according to The Daily Telegraph.
Boris Johnson has recently looked to play down concerns that up to five million Britons could be barred from taking holidays in the European Union because their vaccinations are not recognised by its passport scheme.
The problem centres on doses made by the Serum Institute of India being known as Covishield.
Despite it being the same as other AstraZeneca vaccines, it has not been authorised by Europe’s regulator and is therefore not recognised by the EU.