The circuit was constructed on arid scrub land by Alessandro Rocci in 1967, opening for the 1968 Spanish Grand Prix. Hugenholtz's design featured a short main straight followed by a course dominated by tight corners and technical sections. The limited overtaking opportunities created by the layout were an inherent feature rather than an oversight: the circuit rewarded mechanical grip and chassis balance over raw power, which made it a demanding test of driver precision and tactical race management.
Jarama was the original host of the modern Spanish Grand Prix, staging the inaugural 1968 edition before sharing the role with the Montjuïc Circuit in Barcelona during the 1970s. Jarama hosted the race in 1968, 1970, 1972, 1974, 1976, 1977, 1978, 1979, and 1981.
The circuit's most celebrated Formula One moment came at the 1981 Spanish Grand Prix, which stands as one of the most intense defensive drives in the sport's history. Gilles Villeneuve, in his turbocharged Ferrari 126CK, led throughout the race despite being pursued relentlessly by four cars with superior aerodynamic efficiency: Jacques Laffite in the V12 Ligier-Matra, John Watson in the McLaren-Ford, Carlos Reutemann in the Williams-Ford, and Elio de Angelis in the Lotus-Ford. Villeneuve's Ferrari was faster on the short straight but was slower through the corners. He held them all at bay for the entire race distance. The victory proved to be the last of Villeneuve's career before his death at the 1982 Belgian Grand Prix qualifying session.
After the 1981 race, Jarama was deemed too narrow for modern Formula One machinery and was removed from the calendar. The circuit hosted its final World Championship round that year.
Beyond Formula One, Jarama was an important venue for the FIM Grand Prix motorcycle racing series. It hosted the Spanish motorcycle Grand Prix fifteen times between 1969 and 1988, making it a central venue in Spanish motorcycle racing across two decades.
Jarama had a long association with touring car racing at the international level. The European Touring Car Championship visited the circuit multiple times between 1968 and 2002. In 1987 the circuit hosted the second round of the inaugural World Touring Car Championship season, the 1987 Jarama 4 Hours. That race was won by Roberto Ravaglia and Emanuele Pirro in a Schnitzer Motorsport BMW M3. Pole position had been taken by Klaus Ludwig in a Ford Sierra RS Cosworth turbo, while Andy Rouse set the fastest lap in another Sierra Cosworth.
The circuit also appeared in the FIA GT Championship in 2001 and 2002, in the BPR Global GT Series from 1994 to 1996, and in numerous formula series including the European Formula Two Championship, International Formula 3000, and the FIA European Formula 3 Championship.
The circuit underwent an extension in 1991 that lengthened its layout, and a further upgrade was completed in 2015. Since February 2022 it has carried the name Circuito de Madrid Jarama - RACE. It continues to host a broad calendar of events including the Formula E Madrid ePrix, the TCR Spain Touring Car Championship, the FIA European Truck Racing Championship, and drift and karting competitions.
Jarama remains an active circuit and a significant landmark of Spanish motorsport heritage, its narrow, technical character unchanged from the era when it challenged the greatest drivers in Formula One.