Spanish warship Infanta Cristina being escorted from Gibraltar's waters by a Royal Navy patrol
Authorities on the Rock said it was the second time a Spanish ship had made an unlawful incursion since a row over sovereignty was re-ignited.
The vessel is understood to have been escorted back into international waters by a Royal Navy patrol boat.
The Spanish warship Infanta Cristina in British Gibraltar Territorial Waters
According to the Royal Navy the HMS Scimitar intercepted the Infanta Cristina off the Gibraltar coast shortly after 9am British time.
It is the second time Scimitar was forced to respond to an incursion into British waters.
Disputes between Gibraltar and Spain over the waters not uncommon but the latest come after a row over the future of Gibraltar erupted during initial Brexit talks.
The Infanta Cristina off the coast of Gibraltar
An EU draft position published earlier this month after Prime Minister Theresa May filed formal divorce papers said the application of any EU-UK trade deal to Gibraltar had to be agreed between Britain and Spain.
A spokesman for Spain's foreign ministry said Spain did not recognise the waters as belonging to Gibraltar and the ship had been on a routine patrol.
He told the Daily Mail: “An illegal incursion? No, because for us it is the utilisation of our waters.
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Gibraltar has its own political system that makes many decisions within the territory but issues like defence and foreign affairs are determined by the UK Government in London
A row over Gibraltar's sovereignty was reignited during Brexit talks
“Spain does not recognise other rights and situations belonging to Great Britain in the maritime spaces that are not included in Article 10 of the Treaty of Utrecht.”
A UK Government spokesperson said: “The Royal Navy challenges all unlawful maritime incursions into British Gibraltar Territorial Waters – and did so again on this occasion.”
A spokesman for the Government of Gibraltar said: “We condemn Spain's ongoing refusal to comply with the UN International Convention on the Law of the Sea.”