The entire airport was closed and businesses in the area evacuated.
All traffic in and out of Gibraltar's border was also stopped as it is the only route in to the territory, the BBC reported.
Gibraltar police say the captain asked for assistance and military explosives experts carried out an assessment.
A statement from Easyjet said the flight to London Gatwick was "delayed due to a technical issue which resulted in a smell of smoke."
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The Airbus A319 had 156 passengers and six crew on board.
A passenger on the flight, Gillie Harvey, said: "There was a strange smell coming from the hold and a sniffer dog went into the hold while we were still on board the plane."
She says they left the plane and were "moved to a secure area" of the airport and informed that luggage would be offloaded and re-screened.