It is one of the westernmost Spanish towns on the ‘Raya vertical’, as it is located in the corner of the inlet formed by the Tagus and its tributary Sever. As Carrasco González (2017, 2569-2571) explains, the initial name of Cedillo must have been the Portuguese Casalinho, as the first inhabitants were probably Beirenses. Derived as a diminutive of casal, it could mean “place of few houses”. Later it was Casas de Cedillo and in the 19th century it was simplified to Cedillo. Casalinho is not documented, as it is a common designation used by the Portuguese. Regarding the origin of Cedillo, the popular etymology circulates that it comes from cedido, as it would be ‘ceded’ by Portugal to regularise the border with Spain: Cedido > Ced(id)illo > Cedillo. This explanation is not plausible for various reasons, as Carrasco González (2017, 2571) explains very well, who, on the other hand, sees as a possible origin for the Rayano toponym, as well as for the other Cedillo, Acedillo and similar in the rest of Spain, an abbreviated form, with apheresis, of Salcedillo. In this case, it would be a place abundant in willows (esp. sauce < lat. salice(m)).

Cited bibliography: 

Carrasco González, Juan M. “Documentación antigua sobre las localidades de habla portuguesa Herrera de Alcántara y Cedillo.” Revista de Estudios Extremeños LXXIII (2017): 2567-2591.