"Beitar are not a racist club. From today religion will no longer be a factor in the choice of the club's players," new owner Moshe Hogeg assured a press conference on Wednesday.
The businessman added: "To sign a player solely because he is Arab would also be a form of racism."
The club, which has its roots in the Israeli far right, has never fielded an Arab player. They are the only side in the Israeli league not to do so, with Arabs accounting for 17.5% of the country's population.
A section of Beitar's supporters are known for their anti-Arab protests. Beitar's hardcore fans, known as "La Familia", court controversy by regularly chanting 'death to Arabs' during matches.
Dozen of ultras have been arrested in the past following attacks on rival supporters.
Beitar's Teddy Stadium in Jerusalem is known as 'hell' due to the hostile atmosphere and violence experienced by visiting teams and their supporters. The club's games frequently require the police to strengthen their numbers in a bid to maintain peace.
In 2013, the club's signing of two Muslim players originating from Chechnya sparked tension. Racist reaction from fans led to the team having to employ bodyguards to safeguard their own protection.
And the club's offices were the target of an arson attack which destroyed all their trophies including their six championship cups.
Beitar has been trying to change its image. Last year they received an award from the Israeli president for their efforts to tackle racism.