Divisions in Israel's Cabinet over the government's policy of building new settlements on the West Bank deepened today when Deputy Prime Minister Yigael Yadin and two Cabinet allies were overridden in their attempt to block the construction of four new Jewish settlements in the occupied territories.

Yadin, who walked out of a Cabinet meeting last week over the settlement issue, charged again today that Prime Minister Menachem Begin's Likud majority was building new civilian settlements on the West Bank under the pretext of expanding existing outposts.

The Cabinet dispute arose as U.S. special envoy Robert Strauss was arriving in Cairo for the latest round of discussions with Egypt and Israel on the issue of Palestinian autonomy. (Story on Page A19.)

Yadin, after a private meeting this morning with Begin, charged that the Cabinet's leading hawk on the issue, Agricultural Minister Ariel Sharon, had "deceitfully misrepresented" decisions by a Cabinet security committee and said that the expansion of two West Bank settlements actually will mean the development of new ones.

Following Yadin's protest, which was joined by Justice Minister Shmuel Tamir and Labor Minister Israel Katz, both members of Yadin's Democratic Movement minority in the coalition, the Cabinet voted to go ahead with site clearance for the settlements, pending a review by the full Cabinet and the Foreign Affairs and Defense Committee of the parliament.

The issue first erupted last week after Yadin returned from a U.S. visit and found that the ministerial settlements committee had approved the construction of two outposts near Reihan and another pair near the new development of Karnei Shomron, both in the Samarian hills in the vicinity of Nablus. The government insists that the move merely expands established settlements.

Yadin argued then that the decision reflected a major policy shift, and that he should have been given an opportunity to vote and, if overruled, appeal the decision, as provided for in the coalition agreement reached when the Democratic Movement joined the Likud government.

Today, Yadin reportedly gave Begin an ultimatum that the Democratic Movement members would boycott the Cabinet session unless they were allowed to appeal the settlement policy.

Cabinet sources said Yadin, Katz and Tamir walked out of the meeting room, and that Finance Minister Simcha Ehrlich persuaded them to return for more discussion.

During the debate, which ministerial sources described as "stormy and explosive," Sharon is said to have shouted at Yadin, "I'll strip you naked and put you on the Cabinet table."

Yadin reportedly replied, "You are deceiving the Cabinet."

The issue also encompassed, by implication, Foreign Minister Moshe Dayan and Defense Minister Ezer Weizman, both of whom have been known to express reservations during the sensitive negotiations with Egypt over Palestinian self-rule.

Dayan left today for a two-day visit in West Germany, but Weizman became embroiled in the issue because the new settlements were referred last week by the Cabinent to a two-man subcommittee including Sharon and Weizman. Weizman reportedly took little interest in the matter and gave Sharon the go-ahead to issue the approval for the new settlements.

Sources in the Democratic Movement said tonight that the party's executive committee will meet Wednesday to decide whether to remain in the Likud coalition.

A number of Democratic Movement leaders were said to be anxious to put the question of staying in the government on the agenda of a party council meeting in two weeks.

But the Cabinet, apparently unmoved by the controversy, today passed a resolution declaring that there was "no basis" for Yadin's allegation that Sharon had misled the government on settlements.