Egypt's decision today to suspend the peace talks here caught American and Israeli delegates by total surprise, and threw the Middle East negotiating picture into confusion.

Secretary of State Cyrus Vance was telling his staff of his pleasure with the rapid progress that had been made during today's round of talks when he received word of President Anwar Sadat's decision to call home his delegation.

"We had no indication," State Department spokesman Hodding Carter III told reporters as Vance rushed off to Egyptians Foreign Minister Mohammed Kamel's hotel suite for a meeting.

The news also caught Israeli officials by surprise. "We see no reason why the talks should be broken off," declared Israeli Foreign Ministry spokesman Naftali Lavie. "Things were moving."

Both Vance and the Israeli government late tonight issued separate statements pledging to do all they could to get the political talks going again.

The toughly worded Israeli Cabinet statement, however, expressed regret over Sadats "extreme decision" and castigated it as proof of "amazing inflexibility."

Read by Meir Rosenne, the Foreign Ministry legal adviser, the statement charged that Egypt had expected Israel to "capitulate" and accept total withdrawal from Arab territory occupied in the 1967 war.

"There isn't and won't be a government in Israel that would give in to such conditions," the Israeli statement saidd give in to such conditions," the Israeli statement said.

Vance, who had earlier thought he was on the verge of the negotiations' first major substantive breakthrough, said he had spoken to Sadat by telephone and "stressed to him the importance of continuing the process for peace - and he had agreed."

Sadat, Vance added, said "he looked forward very much to talking to me, explaining to me the reasons for the decision he took and discussing the actions for the future."

Vance said he would go to Cairo Friday as planned. "I've been up and down and hope this is just temporary," he said.

The secretary of state later said that Egyptian Foreign Minister Kamel had "indicated to me he was going back for consultations which do not necessarily mean a breakdown in the talks. It is important to clarify that." The confusion that reigned here tonight was fed by a welter of contradictory reports originating both in Israel and Egypt.

Egyptian television, for example, reported that President Carter had a 10-minute telephone conversation with Sadat and asked him to continue the negotiating process.

While insisting that he doubted Israel wanted to negotiate seriously, Sadat said that because of Carter's concern, he had authorized the Egytian-Israeli military committee to reconvene in Cairo later this week, two days later than originally planned.

Adding to the confusion was a report on Israeli television that first announced the military talks were on, and then off.

An Israeli radio correspondent in Cairo said all Israeli reporters there were at first prevented from leaving Shepheards Hotel for their own safety. Later, however, they were allowed out to report by an official who arrived to say the talks had not completely broken down.

Israelis, both officials and the general public, were clearly shocked and worried that world opinion would side with Sadat in holding them responsible for the setback in the talks.

Indicative of the profound impact Sadat's peace initiative has had here over the past two months was a remark attributed to an unnamed government minister tonight by Israeli television.

"We will make peace with Sadat in spite of everything," the minister was quoted as saying," "and if someone for the government tries to disrupt it, we can change the government."

But other Israelis were disappointed and worried about what they felt was Sadat's tempermental decision cutting off the discussion before the political talks had been given a serious chance to succeed.

Emerging from an hour-long farewell meeting with Prime Minister Menahem Begin, Egyptian Foreign Minister Kamel said: "My president instructed me to explain why he thinks our delegation should go back to Egypt at this juncture and report to him.

"I can say that the atmosphere surrounding the talks and the public statements made in recent days have something to do with it," Kamel added. That was taken as an allusion to a series of tough statements by Begin, including the prime minister's undiplomatic outburst at dinner last night.

"It will up to the president to decide if and when I shall return," Kamel added.

His Israeli counterpart, Foreign Minister Moshe Dayan, said he was "very sorry about the Sadat decision," and noted Kamel had not blamed the Egyptian decison on anything that happened within the political talks.

"On the contrary, we're making some progress," Dayan said, and expressed hope the political talks would resume.

Back at the Hilton Hotel, site of the negotiations, the rest of the Egyptian delegation - apparently as surprised as anyone by the timing if not the root cause of the recall decision - milled about, waiting to leave for Ben Gurion Airport for the flight back to Cairo.

Surrounded by their luggage, jostling television crews and security guards of both nations, the Egyptians offered various - and sometimes contradictory - explanations for Sadat's decision.

Ambassador Osama El Daz, a key Egyptian negotiator, told reporters that although he did not know the precise reasons for Sadat's decision, he had felt Israelis had not responded to Egypt's conception of the peace talks.

The talks, he said, were on different levels. Egyptians offered Israel peace and acceptance in the Middle East while the Israelis worried about boundaries and Israeli settlements on occupied Arab soil.

Earlier in the day, however, even Egypt's official spokesman, Mursi Saad Eddine, had gone out of his way to insist "all is going smoothly" despite the incident last night involving Begin and Kamel.

Kamel had not responded to Begin's remarks either at the dinner or during the day's brief eight-minute plenary session, the Egyptian spokesman said, because of "our real desire not to make obstacles."

Vance this morning had played down Begin's outburst, but allowed that "outside events could always affect the atmosphere."

But State Department spokesman Carter later emphatically denied pessimistic reports about the talks, saying: "There is no crisis, no deadlock, no breakdown."

Under discussion was a compromise formulation seeking to reconcile Israeli security concerns with Egypt's demands for total Israeli evacuation of occupied Arab territories and a guarantee of the "legitimate rights" of the Palestinians to self-determination.

A successful compromise would have strengthened Sadat's hand in facing Arab critics who have accused him of selling out the Palestinians and being interested only in a separate peace with Israel.