Palestinian leaders of moderate and radical affiliation today bitterly assailed the Israeli Cabinet's decision to set up two Jewish boarding schools in the center of Hebron, saying it is the first step in establishing a Jewish foothold in exclusively Arab towns throughout the occupied West Bank.

Meeting in an angry atmosphere at the municipal hall here, the Arab leaders pledged to wage a campaign of general strikes, protest marches and possibly mass resignations in response to the Israeli government decision Sunday to open the schools.

Hebron officials called upon the city's 40,000 Arab residents to refuse to speak or sell merchandise to Jewish civilians from nearby Kiryat Arba settlement, and to stop working for them. Until now, most Hebronites have maintained a courteous, if not friendly, business relationship with the settlers, and some Arabs work in Kiryat Arba industrial plants and in service jobs at the Jewish civilian outpost.

Hebron Mayor Fahd Kawasme, describing his constituents as "sad, miserable and nervous," predicted that the Israeli decision will exacerbate tensions between Jews and Arabs and possibly lead to violence.

"It means trouble in Hebron," Kawasme said in an interview. "There is trouble when the settlers live in Koryat Arba outside Hebron. How will it be when they settle inside the city?"

There have been occasional clashes between Arabs and Jews in the Hebron area, climaxing with the fatal shooting of two Arab high school students a year ago in nearby Halhoul during a rock-throwing demonstration against Kiryat Arba residents, and the apparent reprisal slaying last month of a Kiryat Arba religious school student as he walked alone through Hebron's Arab market.

Although Israel has about 60 rural settlements in the occupied West Bank, inhabited by approximately 8,000 persons, the policy of this and previous governments has been to bar Jews from settling in densely populated Arab cities and towns.

"This decision is a very hard decision for us. It means that Hebron, an Arab city and an Islamic city for more than a thousand years, will soon be a Jewish city," Kawasme said, sitting in his darkened office, surrounded by somber-faced councilmen, local officials and coffee-drinking businessmen.

Prime Minister Menachem Begin and his rightist supporters say Israel's right to settle in Hebron is based on the Jews' biblical claim to the area, stemming from Abraham's settlement there -- Abraham is also considered a patriarch of Moslems -- and King David's selection of Hebron as the capital of his kingdom. In 1929, 67 members of a small community of Jews living there were killed during Arab riots.

Although Israel has insisted that it has no intention of displacing Arabs from Hebron, or expropriating any private property, Kawasme and his supporters were unconvinced.

"Look at Jerusalem after the 1967 war. They started with just one house, then another and another. They started with one dunum (quarter acre), then another dunum and another. Now, there are 80,000 Jews in East Jerusalem," Kawasme said, referring to that part of the Jordanian-held West Bank that was annexed by Israel to Jerusalem.

"This is just the beginning. If we accept the beginning, we know what the end is. So we reject the beginning. If we accept this, then Bethlehem, Nablus, Tulkarm and Jenin will become Jewish towns," Kawasme said.

When asked what he intends to do, Kawasme said, "We have no power. What can we do?" Then, he turned on the United States.

"The policy of the United States is the policy of two faces. When they [American leaders] look at the Arabs, they say settlements are illegal. When they look at the Israelis, they give them money for settlements."

Halhoul Mayor Mohammed Milhem, allied to the radical wing of the militant National Guidance Committee, called the Israeli move "the natural outcome of the failure of the Camp David partners and a new method to exert pressure on our nation to force it to accept the autonomy conspiracy."

Milhem said the guidance committee plans a series of protests and general strikes.Kawasme said he and his 10-member Hebron council will resign collectively if Israel begins work on the planned 50-student religious school and the 80-student research center and dormitory.

Bethlehem Mayor Elias Freij, generally regarded as a moderate, called the decision "shortsighted, arrogant, unproductive and explosive," and said it will increase Jewish-Arab tensions.

It appeared today that unless Begin and his ruling Likud bloc exert coalition discipline in the parliament's Foreign Affairs and Security Committee, which will review the Cabinet decision, the Hebron plan may face difficulty.

Enough of the committee's coalition members are said to be opposed to the measure. If the Hebron ruling were defeated in committee, however, Begin could resort to one of several parliamentary maneuvers to put it into effect anyway: He could reconvene the Cabinet to adopt the ruling again, or he could have dissident coalition members on the committee replaced by loyalists. There is no precedent for a parliamentary committee overruling the Cabinet.