The bill was passed at a preliminary reading yesterday but it must still be debated in a parliamentary committee, then go through a series of votes in the Knesset before it can become law.
According to the proposal, penned by Shimon Ohayon of the ruling Likud-Beiteinu party, a person who uses the word Nazi or a derivative, a Holocaust symbol such as concentration camp inmates garb or yellow stars of David, or a Nazi symbol, could be imprisoned for six months and fined the equivalent of USD 28,654.
Shelly Yachimovich of the Labour party, who voted against the bill, said there was "a great distance between an offensive and inappropriate expression, and prohibiting it by law".
Dov Khenin of the Arab-Jewish socialist party Hadash noted the extensive use of Nazi terminology by Israeli politicians, including by Prime Minister Benjamin Netanyahu.
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Khenin criticised the proposed bill and said ahead of yesterday's vote: "Will whoever makes a film about the Nazis face prison?".
An official close to the legislation process told AFP today the bill would "most likely be killed" in the committee, adding that attorney general Yehuda Weinstein has deemed the bill unnecessary.
"I would prefer if through education, through the spirit of public debate, there was an atmosphere where these terms would not be so easily used and abused," he said in a statement to AFP today.