Renewed peace negotiations between Egypt and Israel suffered a severe setback yesterday as Egypt said it was useless to resume direct talks and rebuffed Israeli Prime Minister Menachem Begin's request to come here for new meetings.

Begin announced in Jerusalem that Egypt told Israel yesterday to withdraw its military mission from Egypt by today. The delegation led by a brigadier general, has been in Egypt since peace talks broke down in January, maintaining facilities and communications channels for Israeli negotiators.

Immediate Israeli reaction to the Egyptian moves was largely low-key with Begin saying on television that he would rather be insulted than inflict insult.

There was no indication last night that there would be any change in U.S. Secretary of State Cyrus Vance's plans to go to the Middle East Aug. 4 to attempt to arrange new talks between Egypt and Israel.

The Egyptian action came after President Anwar Sadat met for five hours with the National Security Council, the country's highest policy-making body.

Foreign Minister Mohammed Kamel said the council had concluded that while Egypt was prepared to resume direct negotiations, they would be a "waste of time" unless the Israelis make substantive changes in their position.

The likely result is that Egypt will again turn to the United States for help in extracting a commitment from Israel to withdraw from occupied Arab territories and to make political concessions to the Palestinians.

U.S. special Middle East envoy Alfred Atherto is due here tomorrow after talks with Israeli leaders in Jerusalem, to prepare for Vance's visit.

Observers here say it is now easy to predict the substance of what Egypt will tell them.

The United States has pledged itself to keep the peace process going and has committed itself to a settlement based on Israeli withdrawal on all fronts from the occupied territories and Palestinian participation in determination of their own future. Israel has rejected both.

The Egyptians will argue that they showed their good faith by going to the Leeds Castle talks at President Carter's request and by offering full recognition of Israel to no avail. Now it is the Americans' move, they are expected to argue.

American officials have said that they would put forward their own proposals or suggestions if it became necessary to break the impasse. The Egyptians believe it has become necessary.

Kamel, in remarks distributed by Egypt is official Middle East News Agency, reiterated the position outlined by Sadat in a speech last Saturday.

"We are prepared to establish peace, good neighborly relations and security arrangements for all parties," he said. "But the land, and sovereignty, must be excluded completely, because they are not negotiable."

Egyptian officials have said that this country would accept an extended timetable for Israeli withdrawal, and would agree to demilitarized zones, U.N. peacekeepers, or almost any other peacekeeping arrangement once the Israeli commit themselves to an eventual pullout from the territories occuped in 1967. There is no more prospect of that now than there was last spring when a previous round of contacts by Atherton failed to bring agreement on a "declaration of principles" for a settlement.