From around the beginning of the common era, a body of new sutras began to characterise the arhat path as the hinayana, the lesser or inferior vehicle, adequate for personal liberation but small in ambition, and to set against it the bodhisattva's vow to become a fully awakened Buddha for the sake of all beings. Some Mahayana texts go further and depict arhats as having attained a provisional cessation from which they must eventually be roused to take up the greater path.
Theravada rejects the description on several grounds. It denies that the arhat is deficient in compassion: the canon presents the Buddha and his arhat disciples as spending decades teaching, and describes the cultivation of loving-kindness, compassion, sympathetic joy and equanimity as standard practice on the path, not as an optional supplement. It denies that arhatship is provisional. And it notes that the bodhisattva path is not foreign to it: Theravada recognises the bodhisattva ideal as the career the Buddha himself followed and as a legitimate aspiration, while regarding it as extraordinarily rare rather than as the norm for everyone.
The term hinayana is polemical and modern scholarship avoids it. It is worth adding that it never named Theravada specifically; it was aimed at the mainstream schools of ancient India, of which Theravada is the one to survive intact, and Mahayana monks in India lived in the same monasteries under the same discipline as those they criticised in writing.
The disagreement is real and it is about the scope of the goal, not the diagnosis. Both traditions accept the four noble truths, dependent origination, the analysis of the aggregates and the denial of a permanent self. What divides them is whether liberation for oneself is a complete achievement or a stage on a longer road.