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Tieng Anh Vui
The party's over: The BBC's Bridget Kendall explains the Spain-Gibraltar row
Spanish checks at the border with Gibraltar must "fully respect EU law and remain proportionate", the European Commission has said.
Tensions have escalated after increased vehicle searches caused major delays for tourists and locals.
Spain has also said it is considering a new 50 euro (£43) fee to cross the border with the British territory.
Prime Minister David Cameron says he is "seriously concerned", but Spain argues it has a duty to prevent smuggling.
Spain disputes UK sovereignty over Gibraltar, a limestone outcrop near the southern tip of the Iberian peninsula, which has been ruled by Britain since 1713.
'Technical meeting'
Vehicles were delayed for up to seven hours at the end of July because of stricter checks by Spanish border guards.
The European Commission said Gibraltar was not part of the passport-free Schengen zone and therefore Spain was "obliged to carry out checks on persons and on goods", but must abide by EU law.
"The commission urges both Spain and Gibraltar to allow for smooth and efficient border crossings while taking into account these obligations," it said in a statement.
The commission said it had received assurances at the beginning of 2013 that border checks would be "proportionate", but said it had suggested "a technical meeting with the Spanish authorities in order to address the issues raised by the border checks, including the alleged excessive waiting times".
In an interview with the Spanish ABC newspaper, published on Sunday, Foreign Minister Jose Manuel Garcia-Margallo said Spain was considering charging people to enter and exit Gibraltar through its border post.
Mr Garcia-Margallo also hinted at the introduction of other measures, including tax investigations into property owned by Gibraltarians in neighbouring parts of Spain, and the closing of Spanish airspace to flights heading to Gibraltar.
Mr Cameron said none of the measures had been raised with the UK government, while Gibraltar's Chief Minister Fabian Picardo has accused Spain of "sabre-rattling".
Fishing row
Gibraltar has linked Spain's tough stance to the creation of an artificial reef in waters off Gibraltar.
Last month, Gibraltar dropped 70 concrete blocks into the bay to create the reef, but Spanish fishermen, who trawl the area for shellfish, say the move has prevented them working.
Spanish authorities said the blocks had been laid "without the necessary authorisation", and the proceeds from the border fee could be used to "help fishermen affected by the destruction of fishing grounds".
The BBC's political correspondent Alan Soady said there was a reluctance within Mr Cameron's government to get involved in the minutiae of the reef dispute, and a feeling that it would be better dealt with at EU level.
Nevertheless, he said, the UK government did not want to be seen to be doing nothing, hence the serious language being used by the prime minister.
The European Commission said it did not have enough information to comment on the proposed border fee, but the UK's shadow foreign office minister Kerry McCarthy said any such move would be "unacceptable".
Earlier, Sir Graham Watson, a Lib Dem MEP for the South West of England and Gibraltar, said he had written to Jose Manuel Barroso, president of the EU Commission, asking "for his personal intervention to stop such objectionable behaviour by an EU government bullying EU citizens".
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