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Ecuador has accused the UK of making a "threat" to enter its embassy in London to arrest Wikileaks' Julian Assange.
Mr Assange took refuge at the embassy in June to avoid extradition to Sweden, where he faces questioning over assault and rape claims, which he denies.
Ecuador says a decision on his claim for political asylum will come later.
The UK Foreign Office says it can lift the embassy's diplomatic status to fulfil a "legal obligation" to extradite the 41-year-old.
The Wikileaks website published a mass of leaked diplomatic cables that embarrassed several governments, particularly the US, in 2010, and Mr Assange says he fears that Sweden will pass him on to the American authorities.
It was not a piece of news anyone thought would come from Ecuador - and the style of the announcement came as a great surprise.
Ecuador's Foreign Minister Ricardo Patino was visibly angry as he lectured the UK government on its diplomatic obligations for several minutes.
The British "threat" to enter its London embassy to capture Julian Assange, however, might accomplish the unthinkable and briefly unite Ecuador's political forces.
Critics of President Rafael Correa have accused the government of not properly handling Mr Assange's case but have also deemed the UK position unacceptable.
They also fear any violation of Ecuador's sovereignty would strengthen Mr Correa and could turn him into a hero. The question now is whether they will let him fight this battle on his own.
A number of police officers are outside the Ecuadorean embassy, in Knightsbridge, where some of Mr Assange's supporters have also gathered.
Demonstrators also protested outside the British embassy in Ecuador's capital. Images from Quito showed protesters holding signs saying "We are sovereign, not colonies" and a union jack being stepped on.
At a news conference in Quito on Wednesday, Ecuador's Foreign Minister, Ricardo Patino, said a letter from the UK government had been delivered through a British embassy official.
"Today we received from the United Kingdom an express threat, in writing, that they might storm our embassy in London if we don't hand over Julian Assange," he said.
"Ecuador rejects in the most emphatic terms the explicit threat of the British official communication."
He said such a threat was "improper of a democratic, civilised and rule-abiding country".
He added: "If the measure announced in the British official communication is enacted, it will be interpreted by Ecuador as an unacceptable, unfriendly and hostile act and as an attempt against our sovereignty. It would force us to respond.
"We are not a British colony."
A Foreign Office spokesman said the UK remained "determined" to fulfil its obligation to extradite Mr Assange.
"Throughout this process we have drawn the Ecuadoreans' attention to relevant provisions of our law, whether, for example, the extensive human rights safeguards in our extradition procedures, or to the legal status of diplomatic premises in the UK," the spokesman said.
"We are still committed to reaching a mutually acceptable solution."
The law Britain has informed Ecuador it could use in the case is the Diplomatic and Consular Premises Act 1987.
It allows the UK to revoke the diplomatic status of an embassy on UK soil, which would potentially allow police to enter the building to arrest Mr Assange for breaching the terms of his bail.
Mr Patino told reporters an announcement on Mr Assange's bid for political asylum would be issued on Thursday at 07:00 local time (13:00 BST).
The BBC's Bridget Kendall said she believed it was "quite likely" that Ecuador would grant Mr Assange asylum because it had reacted strongly to the UK and may not want to be perceived to be buckling under pressure.
However, she said this would not change anything because he could still be arrested if he left the embassy.
Our correspondent could not recall a precedent in which the Diplomatic and Consular Premises Act 1987 had been used in this way.
And former government lawyer Carl Gardner told BBC Radio 4's Today programme legal advisers would be "urging the most extreme caution".
In 2010, two female ex-Wikileaks volunteers accused Mr Assange, an Australian citizen, of committing sexual offences against them while he was in Stockholm to give a lecture.
Mr Assange claims the sex was consensual and the allegations are politically motivated.
In June, judges at the UK's Supreme Court dismissed his final appeal against extradition to Sweden.
An offer by Ecuador to allow Swedish investigators to interview Mr Assange inside the embassy was rejected.
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