The president of the Spanish region of Catalonia has signed a decree calling for a referendum on independence.
Artur Mas wants Catalonia to hold a Scottish-style vote on 9 November, but does not have the backing of the central government in Madrid.
Spain quickly denounced the move, calling the plan unconstitutional.
Catalonia, which includes Barcelona, is one of Spain's richest and most highly industrialised regions, and also one of the most independent-minded.
On 19 September Catalonian lawmakers voted by a margin of 106 to 28 in favour of authorising the referendum, known locally as a "consultation".
Mr Rajoy and the Spanish government believe any vote would be illegal.
Two hours after Mr Mas signed the decree, Spanish Deputy Prime Minister Soraya Saenz made Madrid's position clear: "This referendum will not be held because it is unconstitutional," she said.
The prime minister is expected to take action at a special cabinet meeting early next week, and is likely to take the dispute to the country's Constitutional Court.
However, Mr Mas says he can use local laws to hold a vote in a matter of weeks.
The decree was signed at a short ceremony and will serve as a message of intent to Spain's central government, says the BBC's Tom Burridge in Madrid.
The question now will be on how far the Spanish government is prepared to go in order to stop a referendum, our correspondent adds.
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The Spanish government has said a referendum on Catalan independence would be unconstitutional, despite protests
Mr Mas has previously insisted that the pro-independence movement would prevail, even if it faces stiff opposition.
"If they think in Madrid that by using legal frameworks they can stop the will of the Catalan people, they are wrong," he said in the wake of the Scottish "No" vote.
Until recently, few Catalans had wanted full independence, but Spain's painful economic crisis has seen a surge in support for separation, correspondents say.
There is resentment over the proportion of Catalan taxes used to support poorer regions.
The pro-independence movement in Catalonia believes that the region can go ahead with the independence vote after the decree is signed.
Earlier this month hundreds of thousands of Catalans formed a "V" for "vote" along two of Barcelona's main roads calling for their right to vote.
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