With the Palestine National Council -- the Palestinian national movement's "parliament"--due to meet next Monday in Algeria, the time is ripe for the Palestine Liberation Organization to come out of the closet and clearly state that eventually the Palestinians must live in peace with Israel. Such a declaration would be a major contribution to President Reagan's Middle East peace proposals. Specifically, it would end Jordan's hesitation to join talks for peace.

Having conducted field research on the West Bank and Gaza since 1978, and as a Palestinian-American, I believe that such a step would be in line with the realism I have sensed there. The Palestinians in these territories have an ardent desire to get out from under the Israeli occupation. They would welcome a Jordanian role, no matter how primary, if it would terminate the occupation.

The people in the occupied areas realize that the present balance of power is favorable to Israel and is likely to prevail for some years. Thus, Palestinians under occupation no longer place any credence in Arab saber-rattling against Israel. The siege of Beirut is a telling argument here.

Since they have physically experienced the reality of Israel as an occupier, Arabs in the West Bank and Gaza know that Israel exists, that it is powerful and that it must be dealt with.

These Palestinians recognize an unpalatable but evident truth: that whatever homeland emerges will have close economic, political, and security relations with its two most immediate neighbors: Israel and Jordan.

The PLO cannot be oblivious to these realities. To salvage the situation, it must embark--best of all, at the forthcoming PNC meeting--on a hitherto "unthinkable" course:

1) Acceptance of U.N. Resolution 242 recognizing the existence of the state of Israel, and at the same time a call for an amendment of the resolution to include a reference to legitimate Palestinian national rights.

2) A declaration that PNC resolutions and other official PLO statements, particularly since 1974, have for all intents and purposes superseded the Palestinian National Charter-- which means that the charter is null and void.

3) A declaration that the PLO will cooperate closely with Jordan during the different phases of the peace process, from negotiations to the actual establishment of a Palestinian homeland. There would be no negation of the hitherto accepted position that the PLO is the legitimate representative of the Palestinian people.

As a prelude to a statement by the PNC, intensive diplomatic contacts should be held with the United States and the Arab countries. Washington should be called upon to initiate steps in the United Nations for the revision of Resolution 242, once the Palestinian statement is issued, and the Arab countries should be asked to endorse the Palestinian statement. Syria and Libya may not endorse a new Palestinian position, but at least a dozen other Arab countries would immediately approve.

Palestinians have come to believe that since it would be years before the Arab state system is either willing or able to extract concessions from Israel by force, diplomacy offers the only viable option at this juncture. Some Palestinians have a greater sense of camaraderie with peace-loving Israeli demonstrators than with their Arab "brethren." Sadly, the moral revulsion over the invasion of Lebanon that shook the Israeli public in the fall of 1982 has not been matched on the Arab side.

Many Palestinians under occupation privately believe a policy move by the PLO along the lines suggested here would be bold and imaginative. It would certainly be in line with the PLO's diplomatic activities since the summer of 1982. Private initiatives should now be translated into public policy. The Reagan peace proposals would then have a chance.