President Anwar Sadat told visiting Rep. Elizabeth Holtzman (D-N.Y.) that an understanding had been reached with Israel "on the broad outlines of an agreement," Egyptian newspapers reported today.

"There exists an understanding on the broad outlines of an agreement, but the details will be made public at an appropriate moment," Sadat was quoted as saying.

The newspaper reports fueled the growing view here that substantial progress has been made in defining the shape of a Middle East peace settlement, and that an agreement in principle may be concluded at Sunday's meeting between Sadat and Israeli Prime Minister Menahem Begin.

The Cairo press, which reflects the views of the government on matters like these, continued today to build up Egyptian hopes that major developments will be announced Christmas Day.

Egyptian newspapers gave front-page headlines to a statement by Israel's chief delegate to the Cairo preparatory talks, Eliahu Ben Elissar, who said the Begin-Sadat talks would be "a historic meeting and a great event."

The Egyptian optimism apparently derives from a sincere belief here that an agreement in principle with Israel is possible without much delay.

Egyptian officials understand that working out the details of such an agreement is likely to be a long, arduous process. They believe, however, that an understanding of the general outlines of a peace settlement is possible.

The very least that Egyptians expect from the Sadat-Begin meeting Sunday is some significant gesture on the part of the Israelis.

This could take the form of a unilateral announcement of a further Israeli troop pullback in the Sinai coupled with a declaration of intent to pursue the negotiations for a comprehensive settlement.

The preliminary Cairo conference, meanwhile, suspended its work today to await Sunday's talks between Sadat and Begin.

"Everything depends on that meeting," declared George Sherman, spokesman for the U.S. delegation taking part with Egypt, Israel and the United Nations.

Egyptian spokesman Morsi Saad Din said "definite progress" had been made in the four meetings held thus far.

"The gaps has not been completely bridged, but partly bridged," he said.

"There are still disagreements, but we know where they are," said Israel's Ben Elissar. "We have defined the areas of disagreement."

Egyptian officials expect Begin and Sadat to upgrade the Cairo talks to the foreign minister level if Sunday's meeting in Ismailia is a success.

Egypt's Middle East News Agency reported today that if the talks are raised to the foreign minister level, U.N. Secretary General Kurt Waldheim would take part.

Cairo newspapers, meanwhile, reported today that Jordan would probably join Egypt and Israel at the peace table in the next phase of the negotiations.

Asked about this prospect, Egypt's chief delegate to the Cairo talks, Ambassador Esmat Abdel Maguid, replied: "Jordan, and the others, are always welcome to attend or take part in the conference whenever they want."