The proposal comes from Madrid Town Hall’s Arts, Sports and Tourism Department and will go up for vote on April 24th.
Madrid's council members will also be voting on whether Spanish writer José Luis Sampedro and actress Sara Montiel — both of whom lived and died in Madrid — should have a street named after them.
But it is the Thatcher Street idea which is causing all the controversy.
Opponents argue the former British Prime Minister doesn't merit the accolade as she never lived in Madrid and had no special relationship with Spain as a whole.
Left-wing Izquierda Unida spokesperson Ángel Pérez told Spanish newspaper El País: "There are more important historical figures that haven’t been honoured with a street name in Madrid."
The leader for Spain's centre party in Madrid, David Ortega, objected to the increasing politicization of street names, although he says his party is not sure which way it will vote.
But Madrid’s right-leaning Popular Party mayor Ana Botella has nothing but praise for the Iron Lady.
Botella, who’s married to former Spanish Prime Minister José María Aznar, described Margaret Thatcher on her blog as “an inspiration to many women” and argued that “hang-ups, resentment and insults were pointless”.
She maintained that Baroness Thatcher “had to confront Britain’s economic stagnation and was able to boost the country’s economy.”
Many people in Spain haven’t forgiven the former British Prime Minister’s economic and foreign affairs policies.
Gijonsocialista ironically tweeted: “Maybe Madrid’s Town Hall will name a street after Margaret Thatcher because she gave us Gibraltar back”.
Tweeter @JotaInKoelle also joked that mayor Ana Botella had forgotten that a street name in Madrid was already named after the former British leader, linking to a street map website where "Calle de Brujas" was highlighted, "Witched Street" in English.
Patricia Pazos argued "Why not Hugo Chávez? If we're going to make a fool out of ourselves we might as well do it right."
Lady Thatcher was the first female British Prime Minister.
She was also the first British Prime Minister to make an official visit to Spain, in 1988.
During the 1982 Falklands War, Margaret Thatcher agonized over Gibraltar's vulnerability to attack from Spain, reported The Guardian in December 2012.
She died on April 8th after suffering a stroke.