Georgetown University President Timothy S. Healy has canceled an campus celebration Arab students had scheduled Sunday for a group allied with the Palestine Liberation Organization, described by Healy as "one of the major terrorist organizations at work in the world today."

In a Feb. 22 letter, Healy reversed an earlier decision by university administrators allowing Arab students to hold what they had billed as a "cultural night." Healy said the planned event was actually an observance of the 13th anniversary of the Democratic Front for the Liberation of Palestine.

The Democratic Front is "part of the PLO and has a seat on the PLO's executive committee," Healy said.

"It does not seem to me appropriate for this university to sponsor, even by the use of its facilities, any organization which supports international terrorism," Healy said in his letter to university vice presidents William A. Miller and William R. Stott Jr.

Zaha Bustami, president of the sponsoring group, the Organization of Arab Students, said last night that the event was to be in no way a celebration of terrorism. Bustami, a Palestinian graduate student, said the event was in keeping with her organization's chartered purpose, the promotion of Arab culture, and was intended for supporters of the Democratic Front, not for members of it.

"We do not have an independence day to celebrate," she said, "so we celebrate the founding" of the Democratic Front. She said her group plans to appeal the action.

Arab students originally had applied for use of the university's Hall of Nations for an unspecified "cultural night" for about 300 people from 6:30 p.m. to midnight. The application was approved Jan. 27 by university administrative services director Karl Pervine.

Late last week, however, according to a university spokesman, fliers for the event were discovered, billing it as an anniversary celebration of the Democratic Front for the Liberation of Palestine and promising "speeches, songs, entertainment and film."

A university alumna brought a flier to Healy's office, and on Monday Healy issued his letter canceling the event, the spokesman said.