After living with the name for more than 500 years, the village of Castrillo Matajudíos (Castrillo Kill the Jews) looks set for a change.

This week the 60 residents of the village in northern Spain will vote on a proposal put forward by the mayor, Lorenzo Rodríguez, to revert to what is believed to be its original name, Castrillo Mota de Judios (Castrillo Jews Hill).

It apparently acquired this name in 1035 when Jews fleeing a pogrom in a nearby village took refuge on the hill. "The people of [nearby] Castrojeriz took up arms against the king's emissaries, killed five of them and 66 Jews, while the rest were banished to Castrillo, which became known as the Mota de los Judios," the mayor told the local newspaper Diario de Burgos.

After Jews were expelled from Spain in 1492, "someone wrote that now we're more Christian and decided to change the name from Jews' Hill to Kill the Jews," Rodriguez said, adding that it was important for people to understand "our roots" before reaching a decision on the name.

There is a local tradition in the Castilla León region of drinking matar judios – a mix of wine and lemonade – on Good Friday. Matarjudios still exists as a surname, as does the more common Matamoros (Kill the Moors). The patron saint of Spain, Saint James of Compostela, is also known as Saint James the Moorslayer. Legend has it that his disciples brought his relics in a stone boat from the Holy Land to Galicia, in north-west Spain.

This was about 100 years after Muslims conquered Spain. Saint James became the symbol of the Christian reconquest, which lasted 800 years and ended in 1492 with the fall of Granada and the expulsion of Jews. Muslims were expelled shortly afterwards.

As the announcement from Castrillo Matajudíos came during the first days of the Passover holiday, there was no immediate response from Spain's Jewish leadership. But a Jewish American who has lived in Spain for many years but preferred not to be named told the Guardian the debate reflected an entrenched historical antisemitism in Spain.

"Frankly it doesn't surprise me that there's a village called Kill the Jews, though it's pretty disgusting that it's taken them till now to think it might be a good idea to change it. There's a casual racism in Spain that no one here seems to notice but which is quite shocking to an outsider. People say 'he's a bit of a Jew' and stuff like that and no one seems to notice. Plus Spain is in complete denial about its Jewish and Muslim history."

Jews arrived in Spain 2,000 years ago, and until the rise of the Inquisition in the Middle Ages Spain had one of the largest Jewish communities in Europe. They were tolerated by the Romans but persecuted by the Christian Visigoths who conquered Roman Spain. The Visigoths introduced forced conversion as early as the 7th century.

As a result, when the Muslims invaded in 711 they were embraced by the Jews who helped them to drive out their Visigothic oppressors. A period of religious tolerance, unheard of anywhere else in Europe, ensued, with Muslims, Christian and Jews living in relative harmony.

However, the plague that swept across Europe in the 14th century was widely blamed on the Jews and in 1391 there were pogroms in all of Spain's major cities, leading to an exodus and mass conversion to Christianity.

Today there are only about 12,000 Jews in Spain, compared with 290,000 in the UK and 478,000 in France. In 2008 a survey carried out by the Pew Research Centre found Spain to be one of the most antisemitic countries in Europe.