Tensions between Algiers and Madrid soared in March when Spain aligned with Morocco over the disputed North African territory.
Algeria has suspended a decades-old cooperation treaty with Spain over Madrid's stance on the disputed territory of Western Sahara.
The Algerian president’s office announced on Wednesday that the North African nation was “immediately” suspending the 2002 friendship agreement.
It was the latest blow to relations between Algiers and Madrid — which depends on Algeria for supplies of natural gas.
Tensions soared in March after Spain aligned itself with Morocco over the Western Sahara, where Algeria supports the Sahrawi independence movement Polisario Front.
In a surprise shift, Spain decided to back Morocco's plan to give more autonomy to Western Sahara as long as it remains unquestionably under Moroccan control.
Algerian President Abdelmadjid Tebboune said in a statement that Spain's u-turn was "unjustifiable" and accused Madrid of "contributing directly to the degradation of the situation" in the region.
The President's office also stated that Spain was abusing its role as an “administrating power” in Western Sahara.
Spain’s government expressed "regret" at Algeria’s decision and reaffirmed its commitment to the friendship treaty.
“The Spanish government regards Algeria as a friendly neighbour country and restates its complete readiness to keep and develop the special cooperation relationship between our two countries, to the benefit of the people of both,” a foreign ministry statement said.
Spain was the former colonial power in Western Sahara until it was annexed by Morocco in 1975. Since then, Algeria and neighbouring Morocco have disputed the territory and broke diplomatic relations in August in the standoff.
On Thursday, the European Union called on the Algerian authorities to "reverse their decision" to suspend the cooperation treaty.
"Algeria's decision is extremely worrying," said Nabila Massrali, spokeswoman for EU diplomatic chief Josep Borrell.
"We call on Algeria to reconsider its decision" and for the resumption of dialogue between Spain and Algeria "in order to overcome the current disagreements", she added.