Liam Byrne unfurled the Gibraltarian banner after running in the 800 metres today at the World Masters Athletics (WMA) Championships in Malaga.
Spanish authorities had previously told event organisers athletes from Gibraltar were banned from displaying the flag because Madrid does not recognise the British territory as a separate country.
Following the decision, four out of the five-strong team from Gibraltar decided to boycott the competition despite months of training and preparation.
But Mr Byrne vowed to compete regardless, saying he would not be “bullied into making decisions that go against your own principles”.
He agreed to run in neutral colours but pledged earlier this week: “Rest assured I will let them know which country I represent.”
His fourth-place finish today means he has qualified for the semi-final tomorrow.
But WMA officials are reportedly considering disqualifying Mr Byrne for defying the ban.
The Spanish Athletics Federation had previously threatened to shut down the entire event down if athletes from the Rock displayed the Gibraltarian flag.
WMA president Stan Perkins told the Gibraltar Chronicle the athletics federation had been acting on orders from the Spanish government.
Madrid’s actions were denounced by the competition organisers as well as the Gibraltarian government, which pledged its full support to the athletes following Spain’s “totally unacceptable discrimination”.
In a statement earlier this week, Gibraltar’s Minister for Sport, Steven Linares said: ”The decision of the Spanish Government, through its Consejo General de Deportes, to prevent Gibraltarian athletes from competing in a race in Malaga in our colours is a perverse vestige of a past of which modern Spain cannot be proud.
“These are vetoes against our people which hark back to the time of the Spanish dictatorship, and they belong in that time.
“We cannot build a strong relationship with our neighbours in this way. We must see nonsense of this sort relegated to history, where it belongs.
“Gibraltar sportspeople can rely on the full support of their Government and of their fellow Gibraltarians.”
The move was also condemned by International Association of Athletics Federations (IAAF) president Seb Coe, who said the team should be allowed to compete under Gibraltar’s colours.
Lord Coe wrote in a tweet: “The IAAF supports Gibraltar’s right to have its athletes compete under its nation’s flag as they are a recognised European Federation.
“We urge the WMA to stand strong against this political interference.”