Greece's new Socialist government, in the first foreign-policy decision since being sworn in two days ago, said today it was immediately upgrading the status of the Palestine Liberation Organization office in Athens.

The decision was announced shortly after Prime Minister Andreas Papandreou told journalists that in accord with his campaign promise, he expected to give the PLO full diplomatic recognition by the end of this year and invite Chairman Yasser Arafat as a state visitor for the occasion.

Dimitris Maroudas, state vice minister for press and information, issued a statement tonight announcing the government's decision to "upgrade" the PLO office here, established as an information and liaison bureau in November 1980. He said this upgrading would stop short of giving the office full embassy status, as the Soviets did earlier this week.

Officials explained that until Papandreou's government receives a vote of confidence from the newly elected National Assembly, to convene Nov. 16, it cannot make major policy changes.

Papandreou's comments, however, made after he had been meeting with Cypriot President Spyros Kyprianou, were considered a definite statement of intent. Papandreou's Pan-Hellenic Socialist movement (Pasok) has been on record for more than a year in favor of upgrading the PLO status.

Party officials today said the final decision would have to await a government revision of its policies toward Israel and the Arab world as a whole. That policy is expected in the prime minister's first policy speech before the assembly next month.

Western diplomats, who have been waiting to see to what extent Papandreou would convert his nationalist and pro-Third World campaign rhetoric into policy, saw in today's statements on the PLO the hand of the new foreign affairs under secretary, Karolis Papoulias. He has long been an advocate of closer Greek ties with the Arab world and the recognition of the PLO.

While Foreign Minister Ioannis Haralambopoulos is the official head of the ministry, he holds the job more by virtue of his seniority in the party and long loyalty to the prime minister than through foreign-policy experience.

In appointing Haralambopoulos, the prime minister indicated that along with the defense portfolio that he held for himself, he would also be his own foreign minister. Papoulias, a lawyer who has accompanied Papandreou on virtually all of his recent travels abroad, is generally considered the prime minister's most important foreign-policy adviser.

The statement on the PLO came as somewhat of a surprise to observers here. Party officials close to the prime minister had indicated previously that he did not intend to rush into the complex questions of foreign policy, preferring instead to concentrate first on domestic issues.

[The government also announced that it was recalling the Greek ambassador to the United States, Ioannis Tzounis, and said his successor would better reflect the government's policies, Reuter reported.]