"We are going to name the new cinema after Gal Gadot, an Israeli actress who brings honor to this country," municipal spokeswoman Orna Yosef told AFP.
"This is a message for our young people because Gal Gadot is an example of success, who has shown that dreams can be attained."
Gadot, 32, won the Miss Israel beauty pageant in 2004 aged 18.
After her two-year compulsory military service she went into modelling and then films, breaking into Hollywood with a role in 2009's Fast and Furious. She now lives in Los Angeles.
Last year, Lebanon and Tunisia banned Wonder Woman because of Gadot's Israeli army service.
The Gal Cinema, which will have two screens, was officially opened on Wednesday with a showing of Israeli director Eran Riklis's thriller Shelter.
Upper Nazareth was founded in 1956 adjacent to biblical Nazareth, the largest Arab city in Israel. Upper Nazareth's population of 50,000 is 80 percent Jewish, with the remainder made up of Muslim and Christian Arabs.