* Banned independence referendum due to be held on Sunday
* Thousands of pro-unity demonstrators around Spain
* Spanish police monitoring schools used as polling stations
* Families stage sleepovers in schools to keep them open (Releads with pro-unity protests)
BARCELONA, Sept 30 (Reuters) - Thousands of pro-unity demonstrators opposing a banned referendum on Catalonian independence from Spain gathered in a Barcelona square on Saturday in a sign of how the disputed vote on Sunday has divided the country.
The referendum, declared illegal by Madrid, has thrown the country into its worst constitutional crisis in decades and raised fears of street violence as a test of will between the central government and the wealthy northeastern region plays out.
Demonstrators waving Spanish flags filled the central square outside the seat of the regional government and Barcelona city hall. One man burnt the Catalan flag while a group tried to tear down a banner reading 'More democracy' hanging from the front of the town hall to cheers from the crowd.
Hours before voting was due to start, it was still unclear whether the referendum would go ahead despite the regional government's assertions that it will proceed and Madrid's insistence that it will block the move.
Tens of thousands of Catalans are expected to attempt to vote on Sunday, although the ballot that will have no legal status as it has been blocked by Spain's Constitutional Court and Madrid for being at odds with the 1978 constitution.
Catalonia has 7.5 million people, many of whom speak the Catalan language, and has a larger economy than Portugal.
Spanish police monitored schools earmarked as polling stations and occupied the Catalan government's communications hub on Saturday in an effort to prevent the referendum from going ahead.
Hundreds of supporters of the referendum spent the night in schools with their children and say they plan to remain there until Sunday to keep them open for voters.
A Spanish government source said more than half the schools had been closed off and police would remove people who attempted to vote on Sunday. Less than a tenth of schools were occupied by parents, the source said.
Should the vote take place, a "yes" vote is likely, given that most of the 40 percent of Catalans who polls show support independence are expected to cast ballots while most of those against it are not.
Parents in some of the occupied schools said police officers had told them they could stay as long as they were not doing anything connected with the referendum.
"The police have been four times," said Laia, a 41-year-old sociologist at a school in central Barcelona where around 100 children were playing and 80 people were planning to stay the night while neighbours brought food.
"They read us out the part of the court order that says no activities related to the preparation of the banned referendum are allowed."
The Catalan police, or Mossos d'Esquadra, who are monitoring the schools, are held in great affection by the Catalan people, especially after Islamist attacks in the region in August that killed 16.
Madrid has sent thousands more police to the region in the northeast of Spain to enforce a court order banning the referendum, many of whom are billeted in two ships in the port.
The Spanish government source said it would be up to police how they carried out orders to remove people from polling stations on Sunday. The head of the Catalan police on Friday urged officers to avoid the use of force.
Organisers urged voters to arrive at 5 a.m. (0300 GMT) at polling stations and to wait in line until the schools opened. Voters must show peaceful resistance to police action, organisers said.
"We must be sure there are lots of people present of all ages," they said in instructions disseminated on social media.
Any volunteer staffing a voting station with use of a census would be liable for a fine of up to 300,000 euros, the government source said.
Pro-national unity crowds gathered throughout Saturday outside town halls including Cordoba, Malaga and Zaragoza, showing that many Spaniards living in other parts of Spain fiercely reject any attempt by Catalonia to break away.
Hundreds gathered in the centre of the capital Madrid waving Spanish flags and chanting 'Spanish unity' and 'Don't fool us - Catalonia is Spain'. Many balconies in the capital are draped with the red and yellow Spanish flag.
Some sang the Spanish fascist anthem 'Facing the Sun', a hymn often played during the dictatorship of Francisco Franco. (Writing by Sonya Dowsett; Editing by Hugh Lawson)