Sixteen years of isolation from the Spanish mainland ended this morning for the people of Gibraltar, Britain's tiny colony at the western entrance of the Mediterranean, with the complete lifting of a border blockade by Spain.

Negotiations between the Spanish and British governments over the disputed territory's sovereignty begin later today in Geneva, a process that Gibraltar residents, most of whom are pro-British, fear will bring irreparable changes in their lives.

Hundreds gathered on both sides of the frontier to witness the midnight (6 p.m. EST Monday) ceremony, at which Spanish officials unlocked the 10-foot-high, green painted iron gates that blocked the road linking "The Rock" across a narrow isthmus to the Spanish mainland.

There were high spirits on the Spanish side of the border and at least good humor on the Gibraltar side.

A Welsh male choir, in Gibraltar for a concert, gave an impromptu recital of hymns. One of the first cars allowed through the reopened frontier, where restrictions on pedestrian traffic were partially lifted two years ago, was a Gibraltarian limousine. On its windshield was a defiant "nothing to declare" placard while the youthful occupants of the vehicle toasted each other with champagne.

The main item on the Geneva agenda for the Spanish team is Spain's claim of sovereignty. While Britain has stated that it will stand by the wishes of the people of Gibraltar, it has agreed to discuss sovereignty as a trade-off for the lifting of the border restrictions that were imposed in 1969 by the late generalissimo Francisco Franco.

A further trade-off has been the lifting of bans that prevented Spaniards owning property and opening businesses in Gibraltar and the extension by the Madrid government of reciprocal rights to Gibraltarians in Spain.

Britain's chief official in Gibraltar pledged in a Geneva newspaper interview Sunday to defend the territory, if needed, in the same way that Britain came to the rescue of the Falkland Islands against Argentina. But many Gibraltar residents, mindful of the accommodation reached by Britain and China last year over the status of Hong Kong, fear what they think will be an eventual sellout by Britain.

A majority also opposes allowing Spaniards to reside and work on The Rock. Nearly 10,000 of Gibraltar's 25,000 population signed a petition last week opposing the trade-offs and Joe Bossano, a powerful local political and labor leader who organized the petition, warned today: "Whatever is agreed at Geneva has not been agreed by the people of Gibraltar, who have not been consulted."

The Franco-imposed blockade had forged a strong sense of unity among Gibraltarians and heightened the singular nature of a community that feels itself to be neither British nor Spanish. Prior to the total sealing of the border, the Madrid government had begun to apply restrictions in 1964, and for the past 20 years Gibraltar has survived in comparative isolation due to British aid. "Now we are being exposed to the real world," said Joseph Gaggero, a prominent Gibraltar businessman.

Gaggero fears that the border opening and the arrival of Spaniards rapidly will make Gibraltar dependent on Madrid and break down the present social cohesion on The Rock.

Gibraltarians are an ethnic mix of Mediterranean cultures who settled on the 2.5 square miles of the colony during the past 250 years. Despite the blockade, Spanish is the main spoken language, although all Gibraltarians also speak English.

In its isolation, Gibraltar has fostered a social and cultural hybrid including betting shops on Main Street, where bettors closely follow the English horse races in excited Spanish conversations to a host of pubs serving warm British ale and, again but for the language factor, indistinguishable from their counterparts in England.

Towering above the cramped and quaint town is the massive rock that dominates the strait separating Spain from Morocco 12 miles away. The strategic importance of Gibraltar as the "key to the Mediterranean" caused Britain to conquer it from Spain in 1704. In the Treaty of Utrecht of 1713 Spain ceded Gibraltar to Britain in perpetuity, but Spain has never relinquished its claim.

Britain's assurances that it will uphold the wishes of the people of Gibraltar mean, in effect, that London has to maintain the costly, as well as politically embarrassing, colonial presence at a time when the strategic importance of Gibraltar has declined sharply.

Spain's persistent call for decolonization and return of Gibraltar to restore Spanish territorial integrity is sympathetically viewed in the United Nations. European opinion also broadly backs the Spanish case.

The Geneva negotiating process has been prompted by the need to solve the dispute and to normalize British-Spanish relations in view of Spain's present membership of NATO and the Madrid government's planned accession to the European Community next year. Progress on Spain's sovereignty claim is viewed by NATO diplomats in Madrid as an important element in the present national Spanish debate over remaining within the alliance.

The issue is due to be put to a plebiscite next year, and a Gibraltar breakthrough would, at least in theory, strengthen the Madrid government in its bid to rally support behind a proalliance stand.

Gibraltarians made their position on the colonial status very clear in a referendum in 1967, when they voted 12,138 to 44 to retain their link with Britain. In private, British officials concede that it would be preferable if the inhabitants of The Rock were to shift their affections toward Spain.

Bossano, the most pro-British and anti-Spanish of the local politicians, ruefully admitted: "We are being told in an increasingly, if gentle fashion, that Gibraltar has to stand on its own two feet economically."

Matching Britain's assurances to the inhabitants of The Rock, Madrid's Foreign Minister Fernando Moran said in an interview in Madrid that if Gibraltar were handed to him on a plate against the will of the Gibraltarians, "I would not want it."

Moran said he would be exploring in Geneva with his British counterpart, Geoffrey Howe, the possibilities of an interim solution that could involve a lease-back formula or a condominium whereby both Spain and Britain would for a period share control over the colony. Moran said there should be "no misunderstanding" over Spain's long-term aim -- the recovery of national sovereignty -- but he said Spain had no intention of abolishing Gibraltar's institutions or forcing Spanish citizenship on Gibraltarians.

"There is room for a restoration of our territorial integrity, whenever that might be, and for the maintenance of Gibraltarian citizenship and a self-governing status for The Rock," he said.