Baroness Symons of Vernham Dean, Foreign Office minister, told the Lords that the Government regretted Spain's use of "border controls as a policy lever" in the row over fishing rights.
Answering an emergency question, she confirmed that the Foreign Secretary, Robin Cook, would meet the Spanish Foreign Minister, Abel Matutes, this weekend to discuss the dispute.
The Tory foreign affairs spokesman, Lord Moynihan, pressed her to "go one step further and take this opportunity to condemn unreservedly the Spanish threat to refuse to recognise Gibraltar driving licences, which is in direct contravention to European law".
But Lady Symons struck a conciliatory note, saying it was better to create the right atmosphere ahead of the talks on Sunday, rather than "inflame" the situation. However, the minister stressed that Gibraltar driving licences were "valid under EU law and must be recognised by member states".
She said that delays at the border crossing with Spain had dropped from six hours to one hour, but this was still unacceptable.
Lady Symons told peers: "The Government regrets the use of border controls as a policy lever and will continue to defend Gibraltar's legitimate rights with determination.
"The keystone of our policy remains the 1969 commitment that we will never enter into arrangements under which the people of Gibraltar would pass under the sovereignty of another state against their freely and democratically expressed wishes."
Lord Moynihan, who had tabled the emergency question, condemned Spain's threat to ban civil flights to and from Gibraltar.
He urged the minister to concur with the senior Tory Sir Malcolm Rifkind's insistence when he was foreign secretary that the idea of joint sovereignty over Gibraltar was a non-starter.
Lady Symons said it would be "extraordinary and unprecedented" for an EU member state to introduce an over-flight ban on civil aircraft of a European partner.Reuse content