Britain and Gibraltar reacted with fury to a European Council document published on Friday that described the British overseas territory as a colony.
The document, laying out proposals to give British nationals short-stay, visa-free access to the EU's borderless Schengen area after Brexit, contained the description in a footnote.
"It is completely unacceptable to describe Gibraltar in this way," British Prime Minister Theresa May's spokesman told reporters.
"Gibraltar is a full part of the UK family and this will not change due to our exit from the EU," he said.
Gibraltar, home to 33,000 people, was ceded to Britain by Spain in 1713, in perpetuity.
The seven square-kilometre peninsula is an internal, self-governing British overseas territory.
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Its government expressed anger over the EU's description, saying the "legal status of Gibraltar is not a matter of argument, it is a matter of fact".
"The use of such language, were it to materialise in the final documents, does not assist the creation a climate of understanding and trust between Gibraltar and Spain as we prepare to leave the EU," it added.
"It is, in any case, totally irrelevant to our departure from the European Union and says more about Spain's anachronistic obsession with Gibraltar than it does about anything else.
"This is totally out of place in the modern Europe of today."