A South American trading bloc is to ban boats with a Falkland Islands flag from docking at its ports.
Mercosur, which includes Brazil, Argentina, Paraguay and Uruguay, reached the decision at a summit in the Uruguayan capital Montevideo.
The dispute involves a vast area of potentially mineral-rich South Atlantic waters and has created a fresh diplomatic headache for Britain, which controls the islands.
Uruguayan president Jose Mujica said solidarity among South America's neighbours was key to his country's foreign policy.
He added: "For the moment, this means accepting that this territory is a colonial British position in our America."
Mr Mujica said British-flagged civilian ships that may supply the islands would be allowed to use its ports, but not military vessels.
Argentina's foreign minister Hector Timerman, whose country claims the Falklands as its own territory, thanked him for taking the position.
The Mercosur decision is the latest in a series by Latin American regional bodies designed to show solidarity with Argentina, which calls the islands Las Malvinas.
Roger Spink, president of the Falklands Chamber of Commerce, said they were a small community and felt increasingly under blockade. He told the BBC: "If we were Palestine, the European Union would be up in arms."
Last week Uruguay said it was banning ships flying the Falkland Islands flag from its ports, prompting the Foreign Office to call on Uruguay's ambassador in London to explain the move.