Describing its future "as even more British after Brexit than it is now", he said: "The whole of Europe will see that Spain is trying to abuse this moment for her own selfish political purposes".
A general view shows the Spanish city of La Linea de la Concepcion (rear) and the tarmac of the Gibraltar International Airport (bottom L) while tourists stand on the top of the Rock (R) next to the European Union flag, in the British overseas territory of Gibraltar, September 14, 2016.
Foreign Secretary Boris Johnson talked with Gibraltar's chief minister, Fabian Picardo, on Friday to assure him of the UK's support after the European Union suggested Spain would have a veto over the territory's future relationship with the trading bloc.
Mr Picardo, who has hit out at the threat of a Spanish veto on the Rock's future, said he was "sure the United Kingdom will be batting for Gibraltar".
On Wednesday, Britain's invocation of Article 50 of the EU's central treaty started a two-year period to negotiate its exit for the 28-member club.
However, senior European Union diplomats have dismissed the suggestion that the European Union will go soft on the issue of Gibraltar in the coming weeks, and warned that Spain had spent time and effort in cultivating support among the other 26 member states on the position.
We are going to look after Gibraltar.
Gibraltar's chief minister Fabian Picardo has lobbied ministers to ensure its interests are represented and said the issue was referred to "tangentially" in Mrs May's letter, which referenced the Government's white paper on Brexit.
"And I'm absolutely clear that our current woman Prime Minister will show the same resolve in relation to Gibraltar as her predecessor did", he said.
A spokesman for the Spanish government added:"It is what we wanted and what we have said from the beginning".
Gibraltar's government has accused its closest neighbour of trying to use Brexit to further its longstanding claims over the British overseas territory.
In a series of television interviews, Lord Howard repeatedly compared the situation to the Argentine invasion of the Falkland Islands which led to war with the UK.
"The Prime Minister said we remain absolutely dedicated to working with Gibraltar for the best possible outcome on Brexit, and will continue to involve them fully in the process."
If the proposal on Gibraltar is accepted as the EU's bargain position, it would increase Spain's leverage in the debate over the enclave's future.
Prime Minister May also sees no room for negotiations over Gibraltar, telling parliament on Wednesday that the United Kingdom would never hand the sovereignty of Gibraltar over to Spain against the wishes of its 30,000 citizens.
"We are very clear that there can not be a change in the status and the sovereignty of Gibraltar unless the people of Gibraltar agree to it, and they don't, they clearly don't", Mr Fallon said.
Sir Michael also refused to be drawn on the details of any "implementation" agreements which could cover trade and the economy after Brexit.