Israel tonight reiterated what it said was a long-standing policy of not submitting to terrorist demands, but an official said it "is willing to cooperate" with any government to end the hijacking of an Italian cruise ship. The Palestinian hijackers reportedly are demanding release of 50 Palestinian prisoners.

The officials said no demands by the hijackers had been received either directly or indirectly, and that as a result, there would be no official reaction by the government.

Hijackers of the Italian cruise ship Achille Lauro have identified themselves as members of the Palestine Liberation Front and reportedly have demanded freeing of prisoners held by Israel, including a member of that same group, Samir Qantari.

Qantari was one of four Palestinian guerrillas who landed on Israel's Mediterranean coast on April 22, 1979, in a rubber dinghy and attacked an apartment building, killing a 32-year-old Israeli and his young daughter.

The attack received extraordinary attention because the victim's wife, who was hiding in a closet during the attack with her infant son, held a cloth over the child's mouth to stifle his cries, and the child died of suffocation. An Israeli policeman was also shot to death during the attack. The Palestine Liberation Front acknowledged responsibility.

Two of the Palestinian guerrillas were killed in an exchange of fire with security forces and two were captured. One of the captured Palestinians was released in a prisoner exchange last May, but Qantari is still being held in an Israeli prison.

As for Israel's policy of not submitting to terrorist demands, a source in the office of Prime Minister Shimon Peres acknowledged that 1,150 Palestinian prisoners were released in May for three Israeli soldiers captured during the invasion of Lebanon. But he added: "Nobody is contemplating surrendering to any demands."

The official then addressed the June hijacking of a Trans World Airlines plane and the subsequent release, as demanded by the hijackers, of Lebanese Moslem prisoners captured during the war in Lebanon and held by Israel. "Okay, I'm not denying that there is a precedent," he said. "But Israel is distinguishing between that and our policy of not succumbing to terrorists' demands."

After a meeting tonight with a visiting West German delegation, Peres told reporters, "The ship is not in territorial waters of Israel. We didn't get any demands, and Israel will continue to fight terrorism."

After a brief meeting of the Cabinet, Yossi Beilin, its secretary, also said Israel would not react officially to the hijacking until demands are received by the hijackers. But he repeated Israel's stated policy of not yielding to demands to release prisoners in exchange for hostages.

Beilin dismissed suggestions that Israel's decision might be influenced by deteriorating relations between Israel and Italy following the Israeli bombing last week of the Tunis headquarters of the Palestine Liberation Organization.

After the Tunis bombing raid, Italian Prime Minister Bettino Craxi condemned Israel for conducting "terrorist violence," and sent a message to PLO Chairman Yasser Arafat offering condolences for the victims of the raid. An Israeli official, briefing foreign correspondents today, suggested that Italy's tacit recognition of the PLO could become a factor in the hostage crisis.

"Italy recognizes them, and you can see it in Craxi's warm, friendly and loving relation with Arafat," the official said.

He added, "Italy showed that it supports terrorism and it invited additional acts that have ironically now hit them directly. It's an Italian ship. They have good relations with the PLO, and now they can get themselves out of it."

Beilin, however, said, "I don't think that the messages which went to Israel and from Israel to the Italian government about what happened in Tunisia will have an impact on the current issue, because it is another issue totally."

The Cabinet met today as the Ministerial Defense and Security Committee, meaning that all deliberations on the hijacking were classified and subject to military censorship.

However, Communications Minister Amnon Rubenstein told reporters after the session that the government was adament about not "surrendering to blackmail."

"These demands are not made by an obscure organization, but by the PLO. The PLO has many branches. It has got international standing. It is up to the community of nations, including those nations who give recognition to the PLO, to put an end to this scandalous behavior," Rubenstein said.

The Palestine Liberation Front began as a component of the PLO but has undergone several schisms since then, with some splinters now opposing Arafat.