The key political committee of the Palestine Liberation Organization today approved a recommendation that stopped short of outright rejection of President Reagan's Middle East peace plan in a victory for PLO Chairman Yasser Arafat over PLO radicals.

The recommendation will be submitted Tuesday to the more than 350 delegates of the Palestine National Council (PNC), the PLO's unofficial parliament-in-exile. Arafat loyalists said that endorsement was certain.

Still unclear was whether the language would prove sufficiently encouraging for King Hussein of Jordan to signal his willingness to open negotiations within the framework of the Reagan initiative. The U.S. plan, unveiled Sept. 1, calls for Jordan to be associated with a Palestinian entity to be created on land now occupied by Israel.

As expected, the wording of the PLO committee's key recommendation was basically negative. It said that the Reagan plan did not "satisfy" PLO demands, such as for an independent Palestinian state, and thus was "not accepted" as a "sound basis" for solving the Arab-Israeli conflict.

But the fact that Arafat had been able to defeat stout radical insistence that the plan be unambiguously rejected was from the beginning of the session here considered to be the acid test of his authority. In Palestinian eyes at least, the plan was not formally rebuffed regardless of what interpretation the United States, Jordan, Israel or anti-Arafat radicals choose to make.

"The most important thing is that the PNC does not reject the Reagan plan," Amhad Abdel Rahman, the council spokesman and an Arafat supporter, told reporters. "This is the best the PLO could do without splitting radical and moderates' ranks."

Arafat loyalists demonstrated their confidence by announcing the adoption of the key recommendation before the PNC plenary session met this evening and by making public the exact language of its contents.

The language of the other recommendations was not immediately available, but conference sources said that there were no major changes from wording hammered out a week ago.

In general, the PNC was asked to approve ongoing talks with Jordan and formation of a confederation with that country after establishment of an independent Palestinian state on the West Bank and Gaza Strip, which now are occupied by Israel. The committee also urged the PNC to back the Arab League's Fez plan, which implicitly offers to recognize Israel; approve PLO contacts with democratic and progressive elements in Egypt; and condone talks with progressive and democratic Israelis willing to support establishment of an independent Palestinian state.

Many delegates felt that the real object of the PNC--aside from renewing Arafat's mandate as chairman--was to prevent the Israelis and the Americans from blaming the PLO for what is seen here to be the inevitable eventual failure of the Reagan plan. The tortuous discussions reflected the moderates' determination not to let their radical colleagues compromise that goal.

Israel has rejected the U.S. plan from the start, and Washington's failure to persuade Israel to withdraw its Army from Lebanon is said to have moderated King Hussein's enthusiasm for it. In principle the king has promised to make known his decision on joining talks by March 1.

At the end of a week of often stormy debate, the committee approved a recommendation saying: "The Reagan plan in substances does not satisfy the inalienable national rights of the Palestinian people, as it denies them the right of return, self-determination and the establishment of an independent Palestinian state in Palestine."

It continued: "This Reagan plan, which is in contradiction with international legality, is not accepted by the political committee as a sound basis for a just solution of the Palestinian problem and the Arab-Israeli conflict."

Arafat loyalists earlier had suggested that the final version might be more explicit in hinting that a more forthcoming attitude would depend on U.S. moves to make the Reagan plan more palatable. But Rahman said: "The U.S. administration must take the next step."

Rahman confirmed that no specific recommendation would deal with the composition of a Jordanian-Palestinian delegation in any peace talks.

"When we speak about a confederation of two states, it is implied we are not against any joint delegation," the spokesman said.

A month ago, a key Jordanian royal adviser said that the PNC should publicly give a green light for non-PLO Palestinians to participate in talks.