HMS Sabre pursued OPV Infanta Cristina as it sailed around the Rock for at least 120 minutes – refusing to leave departing British waters.
It is the fifth incursion of its kind this year amid ongoing tensions over Gibraltar.
Royal Navy sources confirmed the interception to Daily Star Online – which happened earlier today at around 10am local time.
Witnesses reported the vessel was around a mile and a half off shore, meaning it completely ignored the three miles of British waters around Gibraltar.
Daily Star Online has contacted the government of Gibraltar and the Foreign Office for comment.
“I’ve said it many times, what we need is a bigger vessel”
The Royal Navy boat was dispatched to escort the vessel as it passed through the waters of Gibraltar.
HMS Sabre is a fast patrol boat which has been working with the Gibraltar Squadron since 2003.
Her and her sister ship HMS Scimitar are used to police the British waters – but the tiny vessels are often dwarfed by warships sailing past from Spain.
OPV Infanta Cristina is a corvette that is 291 ft long, and weighs almost 1,500 tons – armed with torpedoes, motars and guns.
Witnesses on social media shared pictures of the Spanish ship being shadowed by HMS Sabre – saying the incident lasted two hours.
Residents called for the Royal Navy send larger warships to Gibraltar to further deter the Spanish.
One wrote “getting bolder and bolder and more assertive in British waters” and added “I’ve said it many times, what we need is a bigger vessel”.
Another said “bloody b*stards” and “something honestly needs doing about this, many other nations would simply not put up with this”.
Britain and Spain have been feuding over Gibraltar for the better part of 300-years – with the row being reignited amid Brexit.
Last year, defence chief Gavin Williamson said Gibraltar will “always be under the Union flag” amid ongoing concerns.
He added: “Ever since the Royal Marines seized it all those centuries ago, it will always be under the Union flag long into the future, so do rest assured we will always look after Gibraltar.”
His comments came after Spain signalled it is preparing a fresh push over the sovereignty of Gibraltar.
Five excursions this year have all been met with condemnation and a response from the Royal Navy.
Prime Minister Theresa May has vowed to “stand by” the Rock after she was accused of caving into the demands by Madrid.
She said: “The UK’s position on the sovereignty of Gibraltar has not changed and will not change.
“I am proud that Gibraltar is British and I will always stand by Gibraltar.”