Spain's government has flatly denied accusations that its police fired shots while chasing a jet ski in waters off Gibraltar and it has criticized Britain for giving credence to rumours.
As the dispute mounted, Gibraltar Chief Minister Fabian Picardo sent a letter to Cameron, according to a statement late on by the territory's government.
In it, he complained that Spanish incursions into British territorial waters at Gibraltar "constitute a serious challenge to Gibraltar's jurisdiction and British sovereignty".
Picard said Spanish military-linked Guardia Civil police shot at the jet ski inside British territorial waters, an incident he described as "dangerous and wholly unacceptable".
"Diplomatic action to date appears to have had no material effect and I fear that Spain will not be deterred by yet another verbal protest no matter how robust," he said.
"It is important that Spain feels the true weight of British reaction to continuing violations of our sovereignty."
Britain's Minister for Europe David Lidington protested the "illegal incursion" to his Spanish counterpart during a European Union meeting in Luxembourg .
And the British embassy's number two man in Madrid, Daniel Pruce, has demanded from the Spanish foreign ministry a "full explanation".
But a spokesman for Spain's foreign ministry told AFP there was no shooting and expressed disquiet that Britain was repeating an "unverified and unfounded rumour".
In Gibraltar, the man reportedly at the centre of the incident, 32-year-old David Villa, told online news site Olive Press that he had been testing his new jet ski with family and friends when the Spanish police gave chase.
"There were three policemen on the boat and I actually saw one of them with a gun in his hand," he was quoted as saying.
"I was just about to drop my friend off at West Beach when I heard the first shot."
On Tuesday, the Gibraltar Broadcasting Corporation (GBC) posted what it says is footage of the incident.
In the video, a boat and a jet ski are both visible. In an accompanying story published on their website, the broadcaster argues that shots are audible a few seconds into the footage.
A member of staff at the GBC television newsroom told The Local that the footage had been provided anonymously "by someone we know" but did not provide further information.
In November, Spain and Britain summoned each other's ambassadors in a spat over a series of naval incidents around the small but strategically situated territory.
Britain has held Gibraltar since 1713 but Spain wants it returned and refuses to recognize British sovereignty over the waters off the land known as 'the Rock'.