Nestled on Spain's southern tip, Gibraltar has been under British control since 1713, but Madrid has long wanted it back.
Authorities in the tiny rocky outcrop fear Spain will influence complex negotiations between the EU and Britain to leave the bloc to try and gain authority over Gibraltar.
But in an interview with Spain's conservative daily ABC, Alfonso Dastis said he didn't want to "jeopardise" the deal by demanding that Gibraltar change its status -- a stance that Britain would likely never accept".
"I won't make an agreement between the EU and the United Kingdom conditional on recovering sovereignty over Gibraltar," he said.
He added that Spain's proposal of joint sovereignty over the Rock, which would see people in Gibraltar get the Spanish nationality on top of the British one, still stood.
"We will try to convince the Gibraltarians that this is a route worth exploring and that it would benefit them too," he said.
Spain has argued this will allow Gibraltar to stay in the 27-member bloc, but authorities there categorically reject the idea.
Gibraltarians had already rejected such a proposal in a 2002 referendum, and they want to stick with the Union Jack despite voting by 96 percent to remain in the EU.
Dastis's comments appear conciliatory as tough Brexit negotiations are under way.
But Britain will still have to wrangle over a clause inserted into the EU's negotiating position which states that post Brexit, Spain will have the right to veto any future relationship between the 27-member bloc and Gibraltar.
This clause caused huge tensions when it was unveiled in March, prompting British Prime Minister Theresa May to say she would "never" allow Gibraltar to slip from British control against the wish of Gibraltarians.