A divided Israel Cabinet today voted to "recreate a Jewish presence" in the Arab city of Hebron on the occupied West Bank by establishing a religious school and a center for the study of the area's Jewish history.

The decision, considered certain to draw U.S. criticism, came shortly before the scheduled resumption of negotiations of Palestinian autonomy in the West Bank and Gaza Strip. In Cairo, Egypt declared its "utmost indignation and condemnation."

"The decision casts more doubts on Israel's ability and desire to face the new delicate phase of negotiations in a spirit that could give a new impetus to the efforts to achieve peace," said an Egyptian Foreign Ministry spokesman.

The israeli Cabinet, asserting that "Jews are allowed to live anywhere under the sun," indicated that the decision means further Israeli projects in central Hebron.

An earlier Cabinet decision "in principle" to allow Israelis to settle in Hebron was criticized by Washington and Cairo and became a factor in a March 1 U.N. Security Council resolution condemning Israel's settlements policy. The United States voted for the resolution, then disavowed its vote two days later.

In today's decision, the Israeli Cabinet voted 8 to 6, with two abstentions. Deputy Prime Minister Yigael Yadin, invoking a parliamentary coalition privilege, insisted that the decision be sent to the Knesset (parliament) foreign affairs and defense committee for review.

Prime Minister Menachem Begin and his rightist supporters in the government have asserted that Israel's right to settle in Hebron is based on the Jews biblical claim to the area, stemming from the prophet Abraham's settlement there nearly 4,000 years ago and David's selection of Hebron as the first capital of his kingdom.

A small community of pious Jews lived in Hebron in 1929 when rioting Arabs killed 67 of them in one of the worst massacres of the 30-year British mandate in Palestine. When Israel captured the city in 1967, a group of ultranationalists tried to settle there, but were evicted by the Israeli Army and moved outside the city limits to what is now Kiryat Arba.

Since then, the Labor Party governments and, subsequently, Begin's Likud government, have followed a policy of preventing Jewish settlers from moving into densely populated Arab towns in the West Bank because of the security risks. On Feb. 11, the Cabinet broke with the policy and supported the right of Jews to settle in Hebron and other Arab towns, but it delayed implementing that decision until today.

If approved by the Knesset committee, as expected, the decision assures the first officially recognized Jewish presence in central Hebron since the 1929 Arab riots.

About 17 Israeli families from the nearby Kiryat Arba settlement have been aquatting illegally in a former Jewish clinic in Hebron since last March, and the government has been quietly helping them make the derelict building habitable. Today's decision indirectly legitimized the squatters' presence, since the Cabinet voted to expand the former Hadassah Clinic to accommodate a field school.

Cabinet Secretary Aryeh Naor said the field schoool students will study the history of Jewish life in Hebron "and the Jews' geographical situation there."

The total project is expected to cost $2.5 million, including eight buildings for the religious school, which will have a dormitory, classroom buildings and service structures.

The Feb. 11 decision was made in reaction to the murder of 23-year-old Kiryat Arba religious school student as he walked alone in Hebron's Arab market. That slaying was believed to be in retaliation for the fatal shooting last year of two Arab youths who allegedly had been stoning Kiryat Arba residents during a demonstration.

The main focus of the new settlement will be the yeshiva, or religious school, at which students, and perhaps their families, will live. Naor said details of the project will be decided by the Knesset committee, but Cabinet sources said about 50 students will open the school, which will probably be located near the ruins of the Avraham Avinu synagogue in the center of the city.

An additional floor will be added to the old Hadassah Clinic for the field school, which will accommodate about 80 students.

When asked whether the Cabinet had debated the likely international response to the decision, Naor replied, "The opinion of the Cabinet was that the political implications of this decision must be very clear and very direct -- that is, Hebron will not be a place where Jews will not be allowed to live."

He added," Jews are allowed to live anywhere under the sun, since the year 1945, when we had a victory over you-know-who," referring to the defeat of Nazi Germany.

The decision was not as surprising as its timing, coming just before the resumption of autonomy talks in Alexandria on Thursday and about three weeks before Begin is scheduled to travel to Washington to discuss the moribund autonomy negotiations with President Carter.

Rabbi Moshe Levinger, leader of the Hebron settlement movement, tonight welcomed the decision. He said, "with God's help, there soon will be Jewish families living in Hebron." He called the Cabinet action "a good beginning."

Cabinet sources said Education Minister Zevelun Hammer and Moshe Nissim, a minister without a portfolio, tried to have the vote delayed until Begin's return from Washington, but that Begin argued forcefully for an immediate vote.

Voting against the measure were Yadin, Deputy Prime Minister Simcha Ehrlich, Defense Minister Ezer Weizman, Industry Minister Gideon Patt, Justice Minister Shmuel Tamir and Labor Minister Israel Katz. Interior Minister, Yosef Burg, head of the autonomy negotiating team, was absent, and Religious Affairs Minister Aharon Abu-Hatzer and Energy Minister Yitzhak Modai abstained.