The chairman of an Israeli commission that investigated the 1982 massacre of hundreds of Palestinians in Beirut was empowered today to reexamine classified documents at issue in former Israeli defense minister Ariel Sharon's $50 million libel suit against Time magazine.

In Jerusalem, Cabinet Secretary Yossi Beilin told reporters that the government decided to permit the chairman of the now-defunct three-member commission, former Israeli Supreme Court president Yitzhak Kahan, "to inspect certain classified documents of the Kahan Commission and reply in writing to the American court . . . . "

Earlier this week, the Israeli Supreme Court rebuffed Time in its efforts to gain access to a secret appendix to the commission's report and to notes of meetings Sharon had with Lebanese Christian Phalangists the day before the September massacre began.

Today's unusual step by the Israeli cabinet complied with a request by Abraham D. Sofaer, the U.S. District Court judge in Sharon's trial.

Sharon alleges that Time falsely defamed him in reporting in February 1983 that the secret appendix to the commission report contained details of a conversation in which he allegedly told leaders of the Lebanese Christian militiamen that he understood their need "to take revenge" for the assassination of Lebanon's president-elect, Bashir Gemayel, a day earlier.

Time said that conversation occurred the day before Sharon allowed the militiamen into the Beirut camps, where the massacre of more than 700 Palestinians occurred.

On Thursday, Time correspondent David Halevy acknowledged in testimony that it was his "evaluation" and "analysis" that the details of the conversation were contained in the appendix, which neither he nor Time's lawyers have seen.

Sharon, who has examined the document three times, says that he never discussed revenge and that notes of his conversation with the Phalangist leaders are not in the secret appendix.

The Kahan Commission was dissolved in February 1983. How the panel's findings will be introduced into court here remained unclear today. However, Sharon's chief lawyer, Milton S. Gould, said he hoped Kahan could be brought to New York to testify.