The Israeli Defense Ministry today declared the National Guidance Committee, which has dominated the Palestinian nationalist movement in the occupied West Bank and Gaza Strip, illegal.

Invoking emergency security regulations carried over from the era of the British Mandate, the Army command banned all activities of and membership in the committee. Defense Minister Ariel Sharon approved the order after consulting with Prime Minister Menachem Begin, defense sources said.

Founded in 1978, the 24-member committee dominated West Bank politics until a year ago, when most of its leaders were placed under "town arrest," meaning that they could not travel out of their own municipalities. With no formal chairman, Nablus Mayor Bassam Shaka, was long regarded as head of the committee, which included West Bank mayors, prominent Palestinian journalist and trade union leaders and other Arab notables.

Israeli occupation authorities regarded the committee as an arm of the Palestine Liberation Organization and accused it of complicity in violent demonstrations in the West Bank and Gaza Strip.

The committee's influence waned when two prominent members, Hebron Mayor Fahd Kawasme and Halhoul Mayor Mohammed Milhem, were deported. Its activities virtually ceased two years ago when car bombs believed to have been planted by Israeli settlers crippled Shaka and injured Ramallah Mayor Karim Khalaf.

However, despite the travel restrictions, the leaders kept the organization functioning by telephone and messengers. Israeli occupation officials said that the committee had been getting money funneled through Jordan from Arab states.