The Prime Minister threatened to take Spain to the European Court after they continued with the extra controls.
Downing Street described the country's behaviour as "politically motivated and totally disproportionate" while Spain threatened to take Britain to the United Nations as diplomatic relations between the two deteriorate.
As planned, the Royal Navy headed south today with one ship calling in at Gibraltar.
ITV News Europe Editor James Mates reports:
The helicopter carrier HMS Illustrious left Portsmouth Naval Base, Hampshire, and will join the navy flagship HMS Bulwark, which has sailed from Devonport for the Cougar '13 operation.
Also sailing tomorrow will be HMS Westminster, a type 23 frigate, which will visit Gibraltar en route.
A Downing Street spokesman said the Prime Minister was "disappointed" by Spain's refusal to remove the border checks over the weekend.
– Downing Street spokesman
Clearly the Prime Minister is disappointed by the failure of Spain to remove the additional border checks this weekend.
We are now considering what legal action is open to us.
This would be an unprecedented step so we want to consider it carefully before a making a decision to pursue.
Madrid responded by beefing up border controls - leading to lengthy queues - and suggesting a possible €50 (£43.30) fee could be imposed on every vehicle entering or leaving the British territory through the border with Spain.
Downing Street said that any possible legal action would be done through Europe.