Robin Cook, the Foreign Secretary, will meet his Spanish counterpart, Abel Matutes, next Sunday to head off what is developing into the biggest diplomatic storm between the two countries in decades.
The meeting follows days of rising tension, and even calls from some MPs for British gunboats to be sent, after Spain decided to increase border restrictions in a dispute over Gibraltar's fishing rights.
The prospect of a temporary truce emerged after Madrid backed away from earlier threats to refuse to recognise Gibraltar driving licences or to block flights to the rock that pass over Spanish air space.
The Foreign Office revealed yesterday that Mr Matutes had backed away from the threatened bans during an hour-long phone call with Mr Cook on Thursday evening.
Mr Cook said that the best way forward must be first to "calm the situation" and then to discuss the underlying issues rationally. "I made it clear in my conversation with the Spanish Foreign Minister that the threats made earlier this week are unacceptable," he said.
"Britain and Spain have a very good relationship but it has to be based on a clear understanding that the interests of the people of Gibraltar and the consent of the people of Gibraltar are paramount."
Mr Cook and Mr Matutes will hold bilateral talks in Brussels on 21 February before a general meeting of European Union foreign ministers. The Foreign Office said Mr Cook had made clear the UK's concern that the Spanish authorities had tightened border controls around the territory, causing long delays for travellers.
The move to calm the situation emerged after the Spanish Ambassador to Britain, Alberto Aza, said the only solution to the crisis was to end Gibraltar's status as a colony.
He told the BBC Radio 4 Today programme: "The dispute is ridiculous - as ridiculous as the status of Gibraltar being a royal colony in the 20th or 21st century in Europe. The only thing to be blamed for the difficulties there is the status Gibraltar is now enjoying.
"The Gibraltarians have the best of both ways. They have a special status on taxation, Customs... and they want to have freedom of movement, which is impossible."
The Foreign Office minister Joyce Quin has already warned that the Government would raise with the European Commission President, Jacques Santer, the threats by Madrid.
In Gibraltar yesterday, the atmosphere among the locals was one of resigned indignation as they were held up in three-hour border queues by the Spanish authorities.
"It's the old Francoist habits showing through," said Abraham Levy, a Gibraltarian who was stuck with his wife, Mary, in a queue four lanes wide, waiting to cross into Spain.
Mr Levy, who runs a real estate business on the Rock, has a Gibraltar- registered car and a Gibraltar driving licence, or rather, he said, "a European Union passport issued in Gibraltar". He hoped this would satisfy Spanish border guards who were reportedly turning away Gibraltar licence- holders or, according to one rumour, extracting a 20,000 peseta (pounds 85) fine. "It's such a pity because Spain is lovely, we're Latins like they are, but they're rubbing us up the wrong way," he said.
When asked if such links, not to mention geography, make it sensible for Gibraltar to join Spain eventually, he said: "Ask in La Linea if they want to be Gibraltarian. Ask in Barcelona if they want to be French. We're entitled to choose what we want to be. Many of us favour dialogue, but Madrid won't convince us this way."
Why, knowing yesterday's queue would be a nightmare, were they making the crossing?
Mrs Levy said: "We've got a house in Estepona along the costa where my daughter lives, and she's away and there are animals to care for.
"The other week the pond had dried up and all the fish had died. I'd like to send those dead fish to Abel Matutes."