The Costa del Sol has attracted British fugitives
UK Home Secretary David Blunkett is on a two-day visit to Spain to finalise a new fast-track system for extraditions between the two countries.
Signing the agreement, Mr Blunkett said: "Spain has been a popular destination for UK criminals on the run.
"So far this year we have made 35 requests to Spain, nearly half of our outgoing requests. This includes suspects wanted for the most serious crimes, including murder and rape.
"This treaty means they will be surrendered to British police much more quickly and vice versa."
Sanctuary
Among those who sought sanctuary in Spain was underworld figure Ronnie Knight - former husband of EastEnders actress Barbara Windsor - and Freddie Foreman, an associate of the Krays.
Both later returned to serve jail sentences.
In recent years Kenneth Noye - who was jailed for life last year for stabbing Stephen Cameron to death in a road rage murder on the M25 - hid in Spain before his arrest.
The home secretary is also expected to announce plans for pan-European efforts to target international crime lords.
The proposals could mean European police officers working in the UK alongside British detectives - with UK investigators keeping control of each operation.
A Home Office spokesman said the policing proposals would be put to the European Council of Ministers, backed by Spain, France and Belgium.
The idea is to prevent criminals escaping justice by skipping borders.
No 'sell-out'
The Home Office says new units may be set up to deal with specific investigations and then be disbanded, instead of becoming permanent fixtures in each European country.
The move is designed to build on measures taken in May to encourage better inter-European police investigations.
The new agreement could bring down the average time it takes to bring suspects to trial from 12 months to a target of three weeks.
For many years Spain has been the hideaway of choice for British gangsters.
This year alone the UK made 35 extradition requests to Spain and 11 people have been extradited so far.
Cases still outstanding include five murder, attempted murder or manslaughter cases, 14 drugs cases, 10 for theft, forgery or conspiracy, four for rape, indecent assault or assault on a minor and two for kidnapping.
And over the year the UK has received five extradition requests from Spain.
During his visit to Spain, Mr Blunkett will meet Justice Minister Angel Acebes and Deputy Prime Minister and Interior Minister Mariano Rajoy.
It is hoped his visit will cement a stronger relationship between the UK and Spain.
The future of Gibraltar is also likely to be discussed, although Foreign Secretary Jack Straw reassured its 30,000 residents there would be no "sell-out" of British sovereignty.