Israel and Egypt have moved closer together on the question of withdrawal from occupied lands but not on the issue of a Palestinian state, U.S. officials said yesterday after American peace mediator Alfred Atherton met with President Anwar Sadat.

Atherton relayed Israeli Prime Minister Menachem Begin's reply to a message from Sadat last week. Atherton declined to divulge details, but Begins said Sunday he would urge Sadat to resume direct Israeli-Egyptian negotiations, which were suspended in January. Atherton was cautious in his public assessment of progress in the mediation mission. "President Sadat has encouraged me to continue my efforts," he said after the meeting.

The U.S. envoy then left for Jerusalem. He is to return to Wahshington in time for Begin's talks there with President Carter next week.

Egyptian sources said they did not expect any further progress before Begin's Washington talks.

In other Middle East developments:

Palestine Liberation Organization chief Yasser Arafat arrived in Moscow to seek Kremlin support in countering U.S. and Egyptian peace moves.

The Israeli Cabinet selected Yehuda Blum, a professor of international law who has provided much of the legal basis for Begin's peace proposals, to become Irael's ambassador to the United Nations.