The Greek Cypriot government said yesterday it would agree to negotiations on the future status of Cyprus if Turkish troops withdraw from the coastal resort city of Famagusta and allow the return of 35,000 Greek Cypriot refugees.

The proposal, made in Nicosia, came as the U.S. Senate was preparing to debate and vote this week on the Carter administration's call for repealing the U.S. arms embargo against Turkey.

Congress imposed the embargo in 1975 following Turkey's 1974 invasion of Cyprus. Turkish forces continue to occupy between 35 to 40 percent of the island republic, which has an 80 percent Greek Population.

Administration officials, although declining to be identified, hailed the Greek Cypriot proposal last night as a positive response to a Turkish offer made last week.

The officials conceded that the timing of proposals by both sides appeared to be intended to influence the Senate vote. They also said that both proposals contained several ambigious elements that require clarification.

The officials added, however, that they found the Greek response as encouraging sign that the two sides might finally be on the point of talking to each other seriously.

Yesterday's proposal by the Greek Cypriots called for a withdrawal of all Turkish troops from Famagusta, with the United Nations temporarily taking control of the city and permitting the return of all Greek Cypriots. It did not make clear whether the withdrawal would include all of Famagusta or only Varosha, the Greek part of the city.

The offer made last week by the Turkish Cypriot leader, Rauf Denktash, while couched in ambiguous terms, envisioned a withdrawal from Varosha, some kind of interim U.N. role in administering Varosha and the return of as many as 35,000 refugees.