A major show-down between the Israeli government and an ultra-nationalist group determined to establish unauthorized settlements in Israeli-occupied Arab territories was averted with a last-minute compromise today.

Leaders of the militant religious group Gush Emunin reluctantly agreed not to begin the settlements on the West Bank of the Jordan River. The government of Prime Minister Menahem Begin in return promised to allow some of the group to settle in former army camps in about 10 weeks when it expects the U.N. General Assembly to adjourn and the present U.S. diplomatic peace initiative in the Middle East to have passed its peak.

However, two small groups of Gush Emunim defied the understanding and tried to settle early this morning in Jericho and in Sanur in northern Samaria. Israeli soldiers arrested 40 people at the Jericho settlements, but they were later released.

Nine other groups, packed and ready to set up overnight settlements in abandoned police stations and army camps in various parts of Samria, debated through the night about the proposals submitted by the government at midnight and called off the move at dawn.

In the meantime, Gush Emunim instructed the 400 member families to move into four existing settlements in the West Bank. However, party leaders are aware of the problems this causes and acknowledge that organization may soon face a crisis.

The four settlements have no facilities to absorb the extra people, and some settlers are also reluctant to take their children out of school and give up their present occupations after today's disappointment.

Gush Emunim leaders also fear a split in the organization with young extremists continuing to establish the settlements in defiance of the government.

The break between Gush Emunim, which means Block of the Faithful and whose members believe in the right of Jews to settle everywhere in the Biblical land of the Jews, and the government became apparent Sunday when Begin ordered the leaders to drop their plans for the settlements. After confering all day, the settlers decided to reject Begin's appeal and prepared for a showdown.

The religious groups was also reported to have rejected early this week a proposal by the government that the settlements be considered military outposts and their inhabitants be civilians in army service. Under this arrangement the government could claim it was not establishing new settlements but instead outposts necessary in its military occupation of the West Bank.

Members of Gush Emunim claimed that such "make-believe' was beneath their dignity. They said the main purpose of the settlements was to demonstrate Israel's right to the whole land of Israel and a subterfuge would only defeat their purpose.

During the administration of former Prime Minister Yitzhak Rabin, Gush Emunim members tried to establish numerous settlements in defiance of government policy. The most famous of these attempts was the settlement of Kadum in the heart of Samaria in December, 1975. The Rabin government failed to evict the settlers.

One of the first acts of the Begin government was to give official recognition and encouragement to the Kadum settlement by promising "there will be many more Kadums."