Spain has been accused of using Brexit to make a "land grab" for Gibraltar under official guidelines for negotiations drawn up by the EU.
The European Council document on Friday suggested that Spain will be given an effective veto on whether the Brexit deal applies to Gibraltar.
The draft guidelines drawn up by EU leaders state that the Brexit deal will not apply to Gibraltar without an "agreement between the kingdom of Spain and the UK".
The clause has taken British officials by surprise. One told The Telegraph it is "absolutely unacceptable" and gives Spain too much power over the future of Gibraltar.
"One really wonders why the EU has thought it sensible to put in something that's a bi-lateral issue between Spain and the UK," the official said.
The position is in stark contrast to that of Theresa May, the Prime Minister, who on Wednesday said that Britain would never put the people of Gibraltar under the sovereignty of another state "against their wishes."
Spain has already hinted that it will block any agreement on airline landing rights after Brexit, with one diplomat telling The Financial Times that a deal "cannot apply to the airport of Gibraltar".
Andrew Rosindell, the vice chair of the all-party parliamentary group for Gibraltar, said: "An agreement without including Gibraltar means there can be no agreement.
"British people must and will stand together, we cannot be bullied by Spain, any agreement must apply equally to the whole British family and that includes Gibraltar. There can be no compromise on this."
In the draft negotiating guidelines for withdrawal talks under Article 50, it states: "After the United Kingdom leaves the union, no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without the agreement between the kingdom of Spain and the United Kingdom."
"The Rock", a British Overseas Territory since 1713 with 30,000 residents, remains a major source of diplomatic tensions.
Gibraltar's chief minister has warned the territory should not be used by Spain as a bargaining chip for Britain’s Brexit negotiations.
Speaking during an appearance in Prime Minister's Questions this week, Mrs May said: "We are absolutely steadfast in our support of Gibraltar, its people and its economy. Our position has not changed.
"We have been firm in our commitment never to enter arrangements under which the people of Gibraltar would pass under the sovereignty of another state against their wishes, nor to enter into a process of sovereignty negotiations with which Gibraltar is not content.
"The letter is a notification in relation to our withdrawing from the European Union. Gibraltar is not a separate member of the EU, nor is it a part of the UK for the purposes of EU law, but we are clear that it is covered by our exit negotiations.
"We have committed to involving Gibraltar fully in the work that we are doing."