Following a flag-lowering ceremony whose stark simplicity is intended to ease a wrenching national trauma, Israel leaves the Sinai Peninsula Sunday amid deep anxiety and doubt about the wisdom of retreating from territory on which it has fought four bitter wars with Egypt.

The last third of the 23,442-square-mile peninsula, which the Israeli Army captured in the 1967 Six-Day War and then held in bloody fighting in 1973, will be turned over to Egypt without any of the pomp and ceremony normally associated with historic events.

For Israel, the final withdrawal comes days after the nation watched in anguish the televised spectacle of Israeli soldiers and militant Jewish settlers fighting one another as bulldozers razed entire communities and plowed the remains into the sand dunes.

For both Egypt and Israel, the transfer coincides with a period of severely strained relations over border demarcation disputes. In addition, Israel has charged that Egypt already has violated the 1979 peace treaty by deploying troops in demilitarized zones and by hostile statements made by its leaders.

Although both sides this week reaffirmed their commitment to the Camp David peace process, many Israelis harbor lingering fears that once Egypt gets back the last 12,000 square miles of the Sinai, it will gradually turn against Israel once again--and the price of peace will have been paid for naught.

"Better Sharm el-Sheikh without peace than peace without Sharm el-Sheikh," the late Moshe Dayan said in 1970, and most of Israel believed him.

Successive Israeli governments poured $17 billion into an enormous array of military and civilian roads and facilities in the Sinai, frenetically building and populating what had been an almost deserted peninsula with a sense of permanence that defied any notion of territorial accommodation with Egypt--ever.

Israel built three major air bases, two of them among the most modern in the world; four smaller airfields; a naval base; expansive oil fields in the Gulf of Suez; scores of infantry and armored corps bases; and hundreds of miles of new water, telephone and electrical lines.

The air bases are being replaced by two new bases under construction in the Negev desert.

Anticipating a perpetual Jewish presence in the Sinai, Israel built 17 settlements and populated them with 5,000 settlers at a cost of $2 billion, including the roads to service them.

No issue has been so divisive in Israel--not even the question of whether to accept German war reparations, which led to ugly riots in the 1950s--as the national debate over giving up the Sinai settlements in exchange for peace.

To some Israelis, the bonds to the Sinai are rooted in their religious heritage, based on a deep conviction that the territory is an integral part of eretz Israel (the land of Israel) that was included in Abraham's covenant with God; to others, it is a practical matter of simply not trusting the Egyptians, coupled with the memory of so much bloodshed in the wars the two nations have fought.

For some, it is the anguish of uprooting Jews from anywhere, particularly those who were sent to the wilderness of the Sinai by their government to create an oasis and then became refugees of peace.

But for the nation as a whole, absorbing the meaning of the withdrawal once it is finished is going to be hard psychologically. The Sinai represents 70 percent of the total area Israel has controlled since 1967, and ever since that war Israelis have felt less claustrophobic than they did before.

They felt they had breathing space, a vast natural preserve in which to hike through canyons glittering with red, purple and green rocks, or to explore coral reefs of unsurpassed beauty.

They could flee to the palm-shaded beaches of El Arish or search for archeological remains at the foot of Mount Sinai, where Moses is said to have received the Ten Commandments, and they would feel free, somehow, from the narrow geographical confines of Israel and its constant political tension.

With the changeover Sunday, Israel and the territory it controls will shrink to one-fourth its present size, and it would hardly be surprising if the national psyche again began to show the strain of pre-1967 confinement.

The Israel military, too, will immediately feel the effects of the withdrawal, having given up vital strategic depth that for 15 years has served as a kind of early warning zone against Egyptian attack.

The Israeli Air Force, which has found the Sinai air space ideal for training, will be sharply restricted and will have to move its exercises over the Mediterranean. Similarly, the Army, which has enjoyed vast spaces for maneuvers, will be compressed into the Negev desert, where it has already experienced problems from overcrowding.

For Prime Minister Menachem Begin and his Likud coalition government, the Sinai withdrawal has broad political implications.

As a rightist leader who pledged when he was elected five years ago never to retreat one centimeter from occupied territory, Begin faces a more serious challenge from his ideological right than from the left.

It is likely he will face more intense pressure to consolidate Israel's control over the occupied West Bank and Gaza Strip as a form of compensating for giving up the Sinai. Proposals have been made to match each dismantled settlement in the Sinai with a new one in the West Bank and some members of parliament have begun circulating a measure that would prohibit any future government from making territorial compromises in the remaining occupied areas.

Having already annexed the Golan Heights, partly in anticipation of the political turmoil he expected from the surrender of the Sinai, Begin has some reason to expect pressure to do the same with the West Bank, although it is unlikely such a drastic step would be taken as long as the Palestinian autonomy plan envisaged in the Camp David accords shows any sign of life.

But in the meantime, Israel's attention will be warily focused on Egypt and its president, Hosni Mubarak, for signs of deviation from the spirit of peace in the Camp David agreements. Just as importantly, Israel's military will be closely watching Egyptian troop movements in the Sinai, keeping in mind Defense Minister Ariel Sharon's repeated warnings that violation of the demilitarized status would trigger yet another Israeli military move into the peninsula.

Under the military annex of the peace treaty, the Sinai will be divided into three zones, each with limits on Egyptian military and police presence. The multinational peace-keeping force will be deployed in the zone bordering Israel.

Although Israel left intact its settlements in eastern and southern Sinai, the government adopted a scorched-earth policy in the northern Sinai, apparently because of its nearness to the Gaza Strip and the danger of Egyptian settlements being used to cover troop movements or smuggling of weapons to Palestinians in Gaza.

As a result, Yamit and the agricultural settlements surrounding it have been bulldozed into the sand and Bedouin nomads, who for centuries have watched with stoic detachment as conquering armies have come and gone, have already pitched their black goatskin tents and tethered their camel herds where the Israelis once dreamed a Jewish metropolis would rise in the desert.