You won't even notice the border. But a US passport would be sufficient if you did.

My last crossing of the border between Spain and Portugal goes back to a few years ago.
We drove from Badajoz to Evora. We were driving fast and at a certain moment to told to each other, HEY we are in Portugal. ..... we did not have to stop at all.

What is the situation now? I do not know , with so many things go on in the world...

There aren't any immigration officials at the frontiers.

Both are in Schengen and routine border control has been abolished. There may be spot checks by local police, esp at a time of heightened tension or when they are in hot pursuit of a criminal gang, but usually there is nothing and you just drive through the border.
Under local law you must carry your US passport, drivers license and car documents as supplied by your rental company. Let them know when collecting the car that you want to drive into Spain. Some local firms may put a restriction on it or force you to buy a breakdown service valid in Spain, but normally you shouldn't have trouble with big multinationals.

Spot checks; In April of 2010, we were stopped at the border by the police, going from Portugal to Spain. While you may not need a International Drivers Permit, it was very easy to show something in the local language. We had no problems and were on our way. At AAA, $22 dollars and that includes photo. For us, required or not, it's a no brainer. Always in the local language and that makes it very easy. Actually, of all our trips to Europe, of which 26 were driving, that was the only time we used our IDP. But we always have one. Richard

No, but bring money for the drop charge

Crossing from Portugal to Spain - or vice versa - is the equivalent of going from NY to CT - you won't even know when it happens unless the police are having some sort of special activity (as in making sure everyone is wearing their seat belt).

nytraverler is right; On our way back into Portugal from Spain there was no problem. But I assure you, when we were stopped they were not just checking seat belts. All cars were stopped. Usually it's checking for drugs. Handed them our IDP and US drivers license, they reviewed each and on our way we went. Have to tell you, one of the police was jovial and the othe one was very serious. I felt no uneasiness, but it's always reasurring to get moving. You decide.

? The American government says you must obtain an International Driving Permit - http://travel.state.gov/travel/cis_pa_tw/cis/cis_1024.html#traffic_safety

Just ensure your hire car has insurance cover for Portugal. Some companies charge extra for this.

Thanks for all the advice!!

Yes, The Guardia Civil can be stupid about just having an American license if you are stopped and car rental companies do not require an IDP. IDP's are easy and inexpensive to obtain.

I recently crossed the border from Portugal into Spain enroute to Salamanca, Spain from Fatima, Portugal. There was a fairly obvious border area on the highway and there was some police activity with some vehicles being checked. nytraveler pointed out the seat belt issue. I am not sure about Portugal but I know that Spain is adamant about everyone wearing their seat belt. They may stop you for other things but absolutely make sure you and and all the occupants of your vehicle have seat belts fastened. Have a great trip!

I wanted to add to ribeirasacra's comment on coverage from the rental car company. I have rented cars in Portugal at least a dozen times and have gone to Spain with that car at least 10 of those times. This March, when I mentioned something to the car rental clerk about going over to Spain, she told me that if we wanted to be covered during our days there, we needed to pay an extra 50 or 60E. I had never heard about that, and since I was in the post-trans-Atlantic-overnight-flight daze, I didn't stop to figure things out, just paid the amount and went on with the trip.

I am not sure exactly what the loss of coverage would have been without the extra charge, she gave the example of towing the car in case of breakdown or accident. I will certainly add this to my list of things to investigate the next time I rent a car, but I offer it here as another heads up to check into when you rent a car with plans to cross the nearly invisible borders in Europe. Laurie