The Carter administration has rejected Israel's request to manufacture the American F-16 fighter on its home ground, Pentagon and State Department officials said yesterday.

The decision is part of a larger administration reassessment of Israeli military requests in light of President Carter's announced policy to curb international trafficking in arms.

In negotiations for arms during the Ford administration, Israeli officials sought permission to produce some of the 250 F-16 fighters Israel wanted to modernize its air force.

However, Carter administration officials concluded that licensing Israel to produce the F-16 raised too many policy and technical problems, including the further spread of weapons technology.

Officials yesterday cited Israel's plan early this year to sell Eduador 24 of its Kafir fighters powered by an American-made General Electric engine. The Carter administration objected to that proposed sale in February because it "would run counter to our policy against the sale of advanced and sophisticated aircraft to Latin America."

Although the U.S. government has the right to veto the sales of its arms by one foreign country to another, sources said yesterday that the export of advanced American technology gained from co-production agreements like the one proposed for the F-16 is harder to control.

Israel, hard-pressed for money to pay for its growing arsenal of modern weapons, is trying to expand sales of its arms to foreign countries. Administration officials said they are having second thoughts about helping Israel broaden its production base for weaponry, given Carter's desire to curb the international arms trade.

Israel, as well as other nations, will still be allowed to buy the F-16 fighter being produced by General Dynamics for the U.S. Air Force. Only the co-production plans have been scrapped.

However, because Israel will not be able to save the money as it had anticipated by producing the fighter at home, it has told administration officials its planned F-16 buy will be reduced from 250 to about 150 planes, sources said.

The reassessment of F-16 co-production plans came as part of the current Pentagon and State Department review of Israel's 10-year shopping list, submitted to the U.S. government last month.

Israel wants so many other modern weapons from the United States, sources said, that Israeli officials are not expected to squawk about the F-16 co-production decision for fear of jeopardizing Israel's other arms requests.

However, any cutback in Israeli military requests - including the F-16 - is likely to provoke fresh protests by Israel's allies in Congress and elsewhere.

Administration officials insist that Israel has never been better armed with American weapons, both in quantity and quality, and will continue to receive them. But Israeli's 10-year "wish list" for American weaponry is described as overkill by sources familiar with it.

The Carter administration estimates that Israel, partly because it has been a leading recipient of American arms, is 60 per cent stronger militarily today than it was at the outbreak of the Yom Kippur War in 1973.

Besides the policy problems of letting Israel produce the F-16 at home, sources said, the deal would have complicated the arrangement for four NATO countries - Belgium, Denmark, the Netherlands and Norway - to produce the F-16.

Although Israel could still copy the F-16 home production, this would involve an immense amount of design and engineering work that a co-production agreement would avoid.