Israel's deputy prime minister, David Levy, said today that the Israeli government has already decided to rebuild the old Jewish quarter of Hebron, the Arab city where a Jewish seminary student was stabbed to death Thursday by Arab assailants, touching off a night of violence by Jewish residents.

In an interview with the Army radio, Levy said there had been a decision "for some time" to go ahead with a plan to reconstruct the quarter, adding "The decision, in its entirety, will be implemented." The plan is understood to call for the resettling of 500 Jewish families in the heart of the conservative Moslem city within three years, a development that seems likely to provoke even more strife between Hebron's Jewish settlers and its 70,000 Arab inhabitants.

At its weekly Cabinet session today, the government discussed the death of American-born Aharon Gross, 19, as well as demands by Jewish settlers in Hebron and nearby Kiryat Arba for far stronger punitive measures against Arabs attacking them and the creation of a militia for their own self-protection.

Gross' death, still under investigation with no suspects arrested, has caused a national uproar, partly because of charges he was left unattended in the street and bled to death before being taken to a hospital. The Army today denied that this was true.

Speaking after the Cabinet session, Cabinet Secretary Dan Meridor said there would be "no radical changes" in the government's security policy in the West Bank as a result of Gross' death and stressed that no private settler militia would be allowed.

"We are not going to allow private citizen activities in the place of the police's work," he said. Anyone, Arab or Jew, found violating the law would be brought to trial, he added.

Meridor also said the Cabinet had decided "nothing specific" regarding the reconstruction of the old Jewish quarter abandoned in 1929 after a massacre of 60 Jews by the local Arab population. But informed sources said several ministers, most notably Ariel Sharon, the former defense minister now without portfolio, had called for the confiscation of the entire Arab market and bus station area in Hebron's center to make way for the rebuilding of the former Jewish quarter.

It appears that a hard-line faction within the Cabinet, making use of the outcry over Gross's death, now intends to press the government to go ahead with a plan adopted in principle in 1980 to rebuild the quarter.

There are now 60 to 100 Jews living in the downtown area in and around the central market. A court injunction against government demolition work on a number of nearby abandoned houses has halted downtown reconstruction efforts.

Downtown Hebron today was quiet but tense. It is still under a curfew, which was lifted for four hours this afternoon to allow the local population to go shopping for food on the eve of the big feast marking the end of the month-long dawn-to-dusk Ramadan fast.

Reporters, allowed into the area for the first time since the killing, were able to see the damage done when a crowd of 50 to 100 enraged Jewish settlers went on a rampage Thursday night, burning stalls and shops in the Arab market in retaliation for the killing of Gross.

Altogether, the damage appeared to be considerably less than first reports indicated. Two or three stores and one shoemaker's shop had been burned out completely, while 50 or so vegetable carts just outside the main market were damaged by fire.

Meanwhile, an Army spokesman today gave more details about its investigation into the killing of Gross as well as Thursday night's rioting by the settlers, which occurred while Army troops at first stood by without trying to stop it.

The spokesman said Gross had not laid unattended for 90 minutes, as local sources and some Army officers first reported, and had already been taken away by the time the first soldiers arrived, which he said had been "within five, 10 or 15 minutes."

The spokesman said Gross had lost a lot of blood from the multiple stab wounds almost immediately and the chances that he could have been saved were "slim."

It was an Arab who finally took Gross to the local hospital and then his own home, believing that Gross was his son because of his dark complexion. The spokesman said doctors at the Arab-run hospital pronounced Gross dead on arrival and then released the body to the presumed father.

The spokesman also defended the failure of the Army to prevent the settlers from burning the shops and carts Thursday night, saying the atmosphere had been "highly charged and very delicate" and indicating the acts of arson were preferrable to "Jews shooting Jews."

But he admitted the Army did not have "full control" of the situation for a few minutes. He said that the Army was investigating the soldiers' behavior and that several settlers had already been arrested for their part in the rioting.