Israeli Defense Minister Ezer Weizman resigned abruptly today, ending months of acrimony and fundamental policy differences between him and Prime Minister Menachem Begin.

His departure strips the Cabinet of a forceful moderate voice.

Weizman, the flamboyant ex-fighter pilot who managed Begin's election campaign in 1977, ostensibly resigned to protest budget cuts in the Defense Ministry. But underlying that dispute were deeper clashes with Begin over Israel's conduct of the Palestinian autonomy negotiations and the policy of settlements in the occupied West Bank and Gaza Strip.

Coupled with last year's resignation of then-foreign minister Moshe Dayan, Weizman's exit will strip the autonomy negotiating team of much of the rapport it had with the Egyptians. Egyptian President Anwar Sadat and Weizman had developed a close relationship, with Sadat frequently referring to Weizman as "my friend Ezra," mispronouncing his first name.

Egyptian Foreign Minister Kamal Hassan Ali said today in Cairo that he regretted Weizman's resignation and praised his "realistic view in favor of a just peace."

Weizman told associates he could not reconcile himself to "the way this government is not functioning." Last month, Weizman stunned the Cabinet by declaring in a television interview that Begin's government could not last another year and that he flavored early elections.

While today's resignation posed no immediate crisis in Begin's fragile Likud parliamentary coalition, it further weakened Begin's power base and set the stage for a bitter factional struggle on who will get the defense portfolio.

The Cabinet made no attempt to appoint a successor today, since Weizman has yet to submit a formal resignation to Begin. After that is done, he will have 48 hours to reconsider before it takes effect.

However, when Weizman announced to the Cabinet his intention to resign, Begain made no effort to dissuade him, as the prime minister has done in the past.

Informed government sources said Begin was considering holding the defense portfolio himself for a while to avert an immediate coalition crisis over a successor.

But the two most likely appointees are Moshe Arenas, chairman of the Knesset (parliament) Foreign Affairs and Defense Committee, and Agriculture Minister Ariel Sharon.

Appointment of either would bolster the hawkish wing of the Cabinet and add a new dimension to Israel's sensitive relationship with Egypt.

Both men are outspoken rightists and advocates of a hard-line stance in the negotiations for autonomy for the 1.2 million Palestinians in the West Bank of the Jordan River and Gaza Strip. Both also are forceful supporters of an aggressive settlements policy in the occupied territories.

If Arens gets the post, he would become the second member of Israel's autonomy team who did not support the Camp David peace accords when they were put to a test in the Knesset. The other is Foreign Minister Yitzhak Shamir.

The vacancy appeared to leave Begin with a difficult choice. If he names Sharon as defense minister, the Liberal Party and Democratic Party members of the coalition may quit the government, which would ensure its collapse and result in early elections. But if Begin does not name Sharon, the temperamental agriculture minister probably would quit, further eroding Begin's support among his conservative constituency.

Weizman's resignation followed a stormy week of feuding between him and Finance Minister Yigael Hurvitz on proposed budget cuts in all ministries and a temporary freeze on expenditures for capital projects.

When a ministerial economic subcommittee ordered officials not to sign checks for new government contracts, Weizman defied the order and signed some himself. He told aides the two-week freeze on outlays would undermine Israel's defense, and that he would not accept responsibility for the results.

Before today's showdown Cabinet meeting, Weizman met briefly with Begin and said he intended to resign. When the prime minister made no attempt to change his mind, Weizman made a brief statement to the Cabinet in which he reportedly said he was at odds with the government's social and political policies.

Weizman's associates said that in conversation last night he singled out such decision by the Cabinet as publicly asserting Israel's right to build settlements in densely populated Arab cities such as Hebron.

Although he was a mainstay in Begin's Herut (freedom) Party in the rightist Likuid bloc, Weizman consistently presented a pragmatist's viewpoint in the negotiations, often warning that such decisions as expanding settlement's during the autonomy talks would only exacerbate tensions between Israel and Egypt.

During the intensive Knesset debate in 1978 over yielding settlements in the Sinai Peninsula, Weizman said, "We did put roots in the soil of the Sinai. The question is, do we have to uproot things to plant new ones? The answer is yes."

The charismatic Weizman, nephew of the late Chaim Weizman, first president of Israel, has an impulsive personality, often admitting that his worst enemy is his "big mouth." A number of times he stormed out of Cabinet meetings, once dramatizing his point by tearing posters off a wall.

Commander of Israel's Air Force in early statehood days, Weizman still flies regularly, sometimes in his own black-painted World War Ii-era Spitfire fighter.

It was not clear tonight whether Weizman will withdraw from politics for a while, or form a centrist bloc in the Knesset to prepare a challenge to Begin in the elections scheduled for May 1981.Public opinion polls regularly show Weizman with the highest popularity rating of any Cabinet minister, but in the Herut Party he has no power base to launch an internal party challenge.

In a major victory for Hurvitz, who has been struggling to balance Israel's budget, the Cabinet later today upheld the budget cuts and project freeze until Jan 10. Cabinet spokesman Michael Nir said the order applies to "all ministries, without exception."

Israel's peace movement reacted with dismay to Weizman's resignation, with Mattiyahu Peled, a peace activist and former Army general, saying, "He simply either had to follow a policy he didn't like, or he had to resign." Peled said the resignation was an "act of desperation," and that the peace process was hurt by it.

Bethleham Mayor Elias Freij called it a "major loss" for mutual understanding between Arabs and Jews, and he praised Weizman's efforts to exert an influence for moderation on the Cabinet.

Gaza Mayor Rashid Shawa said Weizman's resignation means "the Israeli Cabinet is going to go more extreme, which we certainly object to."