Israeli and Egyptian negotiators agreed here today that self-rule elections on the Israeli-occupied West Bank of the Jordan River should be "organized, conducted and supervised" by Israeli civillians and "local Palestinians."

President Carter's special Middle East mediator, Robert S. Strauss, who chaired this latest two-day round of the Palestinian autonomy talks, called the agreement "the first substantial progress in five months of negotiations."

Strauss and the Israeli and Egyptian negotiators told a press conference after today's session that they hoped the agreement would speed up the negotiations, give them credibility after months of deadlock and entice the Palestinians to join the talks.

Despite the optimistic statements, today's agreement marked only a small step toward bridging the last gulf separating the Israeli and Egyptian negotiating positions in the talks begun May 28.

Broad disagreements remain over the form, authority and powers of an envisioned Palestinian self-government council.

"The road is long and hard and we still have far to go," Strauss said, "but it is nice to come out and have something in your hand to show the world that gives these talks credibility."

Strauss refused to be drawn into a discussion of whether it was necessary to bring the Palestine Liberation Organization into the negotiations. Some West Bank Palestinian leaders have said they would deal with Israel on the autonomy question only through the PLO. The United States has refused to negotiate with the PLO until it renounces terrorism and recognizes Israel's right to exist.

The negotiators also would not name "other civilians -- individuals and institutions" who would join Israel civilians and West Bank Palestinians in planning and carrying out self-government elections under today's agreement.

Sources in Israel have speculated that Egyptian civilians and United Nations representatives would help supervise the elections. Strauss said today he would not "specify" the other civilians because "we haven't worked it out yet."

Egyptian Prime Minister Mustafa Khalil, saying the agreement provided the first assurance to the Palestinians of a share in setting up and carrying out the elections, declared: "this is something concrete. This is a real breakthrough."

Israeli Interior Minister Yosef Burg emphasized that civilians rather than the Israeli occupation force would be running the elections.

"There will be no military interference in the elections," Burg said. "They will be free elections."

The agreement appeared to represent movement by Israel away from previous insistence that the military government on the West Bank was the only legitimate "source of authority" for Palestinian self-government there.

Egypt had contended that the source of authority was the Camp David peace agreement, in which Israel and Egypt agreed to negotiate by next May some form of autonomy for the 1.1 million Palestinians living on the West Bank and the Gaza Strip.

"The Camp David agreement is binding," Burg said today, although there remain disagreements in its interpretation. "We will try to find a way to live together under it," he said.

Strauss said he was surprised by a different atmosphere at the talks here. The usual "tensions in the room," he said, had been replaced by "good will and good intentions."

This return to an upbeat attitude toward the negotiation by Strauss contrasted markedly with his gloomy assessment of the talks in testimony before a congressional subcommittee in Washington just three days ago.

He said then that there had not been "one single iota of an agreement" during the negotiations because "there are vast, vast differences that we don't know how to bridge."

All three negotiating governments stand to gain ground against impatient critics from some evidence of progress in the talks. Israeli Prime Minister Menachem Begin's government is known to want to show that it can be flexible on the Palestinian issue in the wake of the resignation of foreign minister Moshe Dayan, who quit last Sunday to dramatize "my dissatisfaction with the way the autonomy talks are being conducted."

The three governments reiterated their invitation to Jordan to join the talks as provided in the Camp David agreement.

To "intensify" negotiations, they also agreed to continuous meetings of a technical working group that would study the powers and responsibilities now exercised by the Israeli military government on the West Bank to prepare for "discussing transfer to authority as stated in the Camp David framework." f

Strauss said he hoped to meet with the principal negotiators in two more rounds of talks in November and December.