President Carter, after two days of meetings with Jordan's King Hussein said yesterday it would be better not to have a Geneva conference on the Middle East "unless we see some strong possibility for substantial achievements" in advance.

Carter's statement to reporters, after saying goodbye to Hussein at the driveaway behind the Oval Office, was the most cautious he has made about his drive for early progress toward a Middle East peace agreement.

In response to a question, he denied that he is more pessimistic than before Hussein's arrival. "I think it would just be a mistake for us to be overly optimistic. To raise expectations too high I think would be potentially very damaging," Carter said.

Hussein has made clear in the past his concern that unrealized hopes for peace could bring explosive reactions from disappointed Arab masses. At a news conference following his White House sessions, he reiterated his view that "Geneva would be a disaster without prior planning and without a realistic determination of all possibilities for making progress in advance of holding a meeting."

Among the key elements in successful preparation, Hussein said in a later interview, would be greater definition of the U.S. position on the substance of Peace.

Before today, Carter and Secretary of State Cyrus R. Vance had freely predicted that a Geneva conference would be held in the second half of 1977. Carter's statements, while not lessening the importance of such a move toward eventual agreement, raises greater questions than before about its chances for success.

When Hussein was asked by reporters whether he expects a Geneva conference to be convened this year, he replied cautiously that "I think the possibility exists."

He added, "It's going to be very much an exercise which requires all the good will in the world and all the courage, and in particular on the part of Israel."

Hussein listed elements which he said weigh in his calculations about Israel's peace decisions:

"Israel is stronger militarily than she has ever been" compared with neighboring Arab states.

Israel "wouldn't do any business" with Jordan toward a negotiated return of occupied West Bank lands from 1967 until the Arab summit conference of October, 1974, Placed sole responsibility for the Palestinian cause in the hands of the Palestine Liberation Organization. Now in "a tremendous inconsistency" Israel wishes to make Jordan the representative of the Palestinian people.

"I fear lack of courage [on the part of Israel] to come to grips with the problem. Is Israel willing to com to terms with herself and accept a gamble of peace, if it is to be called a gamble? Is she willing to withdraw from territories occupied in June of 1967 against [the assurance of] peace for her and for all of us? If she is not there will be disaster for all of us - and maybe to the world." Hussien declared.

In the last two days, Israeli officials here have taken a very hard position in public on the chances for a negotiated settlement. Israeli Ambassador to Washington Simcha Dinitz, speaking to a pro-Israel U.S. lobby group, suggested that Israel would not be willing to make major concessions in return for "mere document . . . a piece of paper" in the form of a peace agreement which Arab governments might later repudiate. He also called for borders which would give Israel "easier victory" over the Arabs in a future war.

Shlomo Avineri, director-general of Israel's Ministry of Foreign Affairs, told rporters here that creation of a separate Palestinian state on the now-occupied West Bank of the Jordan River would be "the first step toward dismantling of Israel." He suggested that areas of the West Bank to be returned by Israel should be absorbed by Jordan in "a joint Jordanian-Palestinian state."

Hussein, on the other hand, said the reality is "a Palestinian identity on the Palestinian side" and "a Jordanian identity on the Jordanian side" with real and lasting links between them. Hussein is believed to be apprehensive that he could not now absorb the Palestinians in the West Bank and elsewhere into Jordan without endangering his rule, even if the Palestinians were prepared to accept such an arrangement.

On the procedural problem of Palestinian representation at Geneva, Hussein voluntered the widely discussed idea of one Arab delegation representing the Arab states involved as well as the PLO. At the same time he said there are other possibilities.

Israel's Avineri, in his news conference, rejected a joint Arab delegation as a procedural solution to convening Geneva, but said Palestinians could be present as members of the Jordanian delegation.

According to presidential press secretary Jody Powell, Carter assured Hussein of continued U.S. support for Jordan's economic and defense needs. Powell said he is "not aware" that the question of CIA support of Jordan was discussed by the two leaders.