The Israeli occupation government's dismissal of three militantly nationalist West Bank mayors, and the subsequent Arab rioting unparalleled in nearly 15 years of Israeli rule there, marks a new era in Israeli-Palestinian relations that will have far-reaching effects not only on the West Bank but on Israel's domestic politics as well.

Defense Minister Ariel Sharon made this clear last week when he characterized Israel's campaign in the West Bank as a historic "power struggle with the Palestine Liberation Organization." His civilian occupation governor, Menachem Milson, talked about the "battle to uproot the PLO from the territories . . . perhaps the most significant battle since 1948," when Israel won independence.

In less than a month, the Israeli government has disbanded and outlawed the only West Bank council of nationalist mayors and other public figures, deposed three of the few remaining popularly elected pro-PLO mayors of the major towns and threatened other militant mayors with the same fate. It also has thrown into the West Bank the largest peacetime show of military force since 1967.

Coupled with the deportation in 1980 of two other pro-PLO mayors and the imposition of "town arrest" travel restrictions on several other outspokenly nationalistic Arab leaders, the recent actions have stripped the West Bank of most of the leaders elected six years ago in what Israel then hailed as the first truly free elections Palestinians had ever enjoyed.

Not surprisingly, the Arab mayors and Israeli authorities have widely different perspectives on the purpose of the current campaign against West Bank militancy. The Israelis say it is a narrow effort directed solely against PLO-oriented leaders who have incited violence against Army troops and Jewish civilian settlers. But the mayors call the campaign part of a "war of attrition" against the Palestinian people and a prelude to Israeli annexation of the West Bank.

What is surprising is the timing of the sharp Israeli measures, which follow by four months Milson's appointment as civil administrator. The Israeli campaign was begun at a time of relative calm in the West Bank--a calm that has been shattered by rioting resulting in the deaths of six Palestinian youths and one Israeli soldier and scores of injured on both sides.

The stage was set several weeks ago when Milson issued the first of several summonses to El Bireh Mayor Ibrahim Tawil to appear at the military government headquarters near Ramallah for a "working" meeting.

Tawil, a close political ally of pro-PLO Mayor Karim Khalaf of Ramallah, first ignored the summons, then openly defied it by having the municipal council adopt a resolution rejecting any such meeting. Attendance, said the mayor, meant cooperating with a civil administration that he and other Arab leaders maintain is a sham and part of an Israeli scheme to unilaterally impose an autonomy accord on the West Bank. The mayors say they preferred the previous military government under an Army brigadier general to the new government headed by Milson, a professor and former Army officer.

Tawil said at the time that he expected to be dismissed for his defiance, and Khalaf said that he expected to be next. Both mayors warned that the move would bring a strong reaction in the West Bank. But on March 18, Milson issued the order dismissing Tawil and dissolving the El Bireh city council, the first such dissolution in the West Bank.

The West Bank disturbances began the next day. A week later, Khalaf and Nablus Mayor Bassam Shaka were similarly deposed after being accused of inciting violence.

The Palestinian leaders have charged--and Milson has denied--that Tawil was deposed in order to provoke a wave of anti-Israeli disturbances that would either justify the further dismissals of Khalaf and Shaka. Both men have been popular symbols of West Bank resistance since they were crippled two years ago by car bombings that have never been solved. Some Israeli officials privately blame the bombings on extremist Israeli settlers.

Milson said, "There is no principle about removing mayors for the sake of removing mayors. We will take necessary measures, legal and administrative, to assure public order."

Asked why the crackdown on the nationalist mayors was launched now, six years after openly pro-PLO candidates swept the 1976 West Bank local elections in the major towns, Milson replied, "The fact that certain dangers are overlooked for a while does not mean you don't have to deal with the threat."

He said Khalaf and Shaka had used their positions to "pressure" West Bank Arabs who do not support the PLO, creating an atmosphere in which moderate Palestinian voices could not be heard.

"Let me remind you, it is not a struggle between the civil administration and the mayors. It is a struggle between the PLO and the Jewish people, and a struggle between the PLO and every Arab who is willing to consider a possible political settlement," Milson said.

He was referring to the village leagues, a network of Israeli-financed civic organizations that Milson has fostered as an alternative political force to supplant the West Bank's pro-PLO leadership. The leagues, which distribute patronage and financial grants among local Arabs regarded as moderate, have been viewed by the Israeli government as a potential bargaining agent for the autonomy scheme envisaged in the Camp David accords.

The nationalist mayors, who have entirely rejected the autonomy plan, regard the village leagues as a "quisling" group and an Israeli-contrived threat to their own power base.

One village league head has been assassinated and several others have been attacked, although they had been given Army-issue submachine guns for protection. Jordan earlier this month announced that village league members would be tried in abstentia for treason and sentenced to death.

Milson, who replaced the deposed mayors with Israeli military officers, has said he intends eventually to install moderate Arabs--presumably village league members--in the West Bank city halls.

By indirectly blaming the previous Labor Party government, then in power, for the success of pro-PLO candidates in the 1976 election, Milson appears to have fueled an issue that already had been shaping up as the most important in the next Israeli elections.

With Prime Minister Menachem Begin's parliamentary majority whittled to a deadlock, Begin has said he wants an early election to broaden his power base. His Likud Party strategists have predicted that consolidation of Israel's control over the West Bank will be the election's key issue.

The opposition Labor Party and its allies nearly brought down the government last week in a no-confidence vote based largely on West Bank occupation policies and the current troubles have only exacerbated that issue.

Abba Eban, a Labor member of parliament, defended his party's role in 1976. "We are very proud of what we did in 1976," he said. "We did establish the basis of autonomy at least at the municipal level."

Eban added: "I can't think of anything more grotesque, to use a weak word, than a government which professes to aspire to full autonomy for the Palestinians on a national scale canceling the limited municipal autonomy that already exists and then denouncing those who brought that limited autonomy into existence."