THE SMILE OF THE LAMB By David Grossman Translated from the Hebrew by Betsy Rosenberg Farrar Straus Giroux. 325 pp. $19.95

DAVID GROSSMAN, the Israeli novelist, is a most remarkable new literary voice. Due to the wide acclaim given to both his nonfiction work, The Yellow Wind, and his second novel, See Under: Love, Farrar Straus Giroux has now published a translation of an earlier book, The Smile of the Lamb.

From its very first pages -- the novel is beautifully translated from the Hebrew by Betsy Rosenberg -- one is aware of Grossman's potential range and originality. On one level the author shows us how the Israeli-Palestinian conflict feels closeup in Andal, a small town in the occupied West Bank: Only when war is at a safe remove and becomes abstract does any of it make sense. On another level -- and here is where Grossman truly excites as a novelist -- he is informing his readers that the Israeli novel is no longer the child of only European literature. Through his graceful use of very different voices, each bearing a distinctly different music, he has given birth to a new hybrid form more true to the Middle East. The European novels that Grossman mentions in The Smile of the Lamb are heterodoxal, concerning a mixed culture. He evokes Camus, who was in continual conflict about his mixed French and Algerian heritage, and Cervantes, whose universe was created by the mixture of Spanish, Arab and Jewish cultures.

Uri, who serves as Grossman's alter ego, is a soldier in an Israeli army unit patrolling Andal. While he is stationed there the fabric of his life is permanently altered. His wife, Shosh, whom he formerly perceived to be a dedicated child therapist, causes the suicide of Mordy, a mute adolescent at her clinic, whom she has seduced. Shosh's incestuous interest in her charges, masked as love, ends up as a sordid tragedy. She and Uri drift apart, she starts an affair with his commander, the worldly realist, Katzman.

Grossman's novel poses the question: What went wrong with Shosh? Everything in her background prepared her to become the natural flowering (her name means rose in Hebrew) of the best in Israel. Her parents, Abner and Leah, are depicted as well-meaning progressives, deeply rooted in the pioneering, humanist tradition of early Israel. Abner is one of several story-telling shadow voices that Uri, in his moral quest, must come to terms with; for many years Shosh's father had been secretly publishing poems in the Israeli newspapers.

But it is Khilmi, an Arab storyteller who lives in a cave in Andal near the terebinth and lemon trees, who is the novel's great imaginative narrative achievement; Grossman creates his voice and story in the Arabic mode. He insists that in order for us to understand Khilmi and his notions of truth and justice, we must enter his head, which has been informed by centuries of Arab storytelling. Just as Uri needs to become Khilmi's spiritual heir, so does Grossman, the Israeli novelist, need to borrow from the Arabic to complete his Israeli novel. Khilmi's sense of timelessness, his notion of past which curls in and over a fluid present becomes the crucial part of Uri's journey. "You see, it isn't his cave, it isn't the lemon tree or the grape bower. It's the lies. It's the blue tunnel into his right eye where words flow like fiction. . . . And whenever I argue with Katzman about the occupied territories, I answer him through Khilmi, using Khilmi's arguments against him. That way I can slip out between the two kinds of justice."

It becomes Uri's fate to tell Khilmi that his adopted son, Yazdi, had been killed by the Israelis. Katzman, Uri's superior, follows him into Khilmi's cave in order to save him from Khilmi's suffering wrath; at the novel's end the Israeli commander and the Arab storyteller fight each other for possession of Uri's soul. THOUGH Grossman's portrait of Khilmi works novelistically, and Khilmi's stories are the best passages in the novel, as a political parable -- which Grossman also means the book to be -- the book works less well. I always get a bit queasy at literary searchings for the exotic which involve perceiving the "other" as a sort of noble savage. Grossman seems not so much in quest of love, as in flight from modernity, which he sees Israel personifying in the Middle East. But the real opposite of his Israeli intellectuals with feet of clay, are Palestinian intellectuals, who are abundant, and who presumably also have feet of clay. Khilmi's true counterpart is the Northern African blue-eyed Berber Jews transplanted into Israel from the Atlas mountains; they also smell of lemon trees and have a desert sense of storytelling, the only difference being their occasional cry: torah! torah! Is it really true that doctors and hospitals are agents of child murder, while the man who sits in the olive grove has his children torn from him? Is it not more complicated than this simple equation?

As I read the novel, I said to myself, I bet Grossman will evoke the music of Um Kultum, the great maternal Egyptian singer, worshipped by the masses. Sure enough, Khilmi invites Uri to listen to her music on his radio. " 'Everyone listens, min elmukhit ila elkhalij, from the ocean to the Arab gulf.' And he smiles a weird smile and sings to me softly as he sways, . . . 'Your eyes take me back to bygone days, reminding me of time past. Beautiful, is it not?' "

But, amidst the plants, leaves and lemon trees, Khilmi can listen to Un Kultum, because he, like everyone else, has a radio. And I know what her music sounds like because her records were sold in the '70s in Paris and New York: Modernity is not merely the wicked province of the culture you happen to be born into. Ironically, Grossman is doing just the opposite of his idol, Cervantes. Don Quixote was a break with the past, a rebellion against the static love-mores of the middle-ages, our first great modern novel. But despite my quibbles, what a rare pleasure to read a novel in which the novelist's narrative and ideas are so gripping, they are worth arguing about! Here we have authentic talent.

Barbara Probst Solomon, who covered the Klaus Barbie trial, is the author of, most recently, "Horse-Trading and Ecstasy," a collection of essays.