David Kimche, director general of Israel's Foreign Ministry, said today that Israeli intelligence agencies had "absolute, complete and irrefutable proof" that Palestine Liberation Organization Chairman Yasser Arafat knew that the Italian liner Achille Lauro was to be boarded by Palestinian guerrillas before Monday's hijacking.

Kimche's charge came as Israeli Prime Minister Shimon Peres hinted that Israel might retaliate for the killing of Leon Klinghoffer, an American Jew, by the hijackers.

Peres said, "We will neither forget this nor stand idly by. We will do everything to protect the lives of people."

Kimche, a former intelligence officer, said he would not provide specific substantiation for the assertion -- presumably to protect intelligence sources -- but he said Israel had information before the hijacking that Arafat's mainstream Fatah wing of the PLO had made plans to launch terrorist operations at Israeli shipping ports.

He also disclosed that an Israeli couple who had left the ship at Alexandria before the hijacking said they had recognized the men as Palestinians and informed the ship's personnel that they suspected them of being terrorists.

The chief of the Israeli Army's military intelligence, Maj. Gen. Ehud Barak, also charged tonight that the hijacking was carried out with Arafat's knowledge, and he said it was initiated by top PLO leaders close to Arafat.

Barak told reporters in Tel Aviv that the PLO was waging "an orchestrated campaign" to deny their involvement in terror raids and reap the political benefits.

He said Arafat was attempting to send a message to his constituents and all Arab states that his diplomatic initiatives for a comprehensive Middle East peace through Jordan and the United States are not preventing him from continuing an armed struggle against Israel.

Barak said Arafat was "playing a double game."

Kimche, when pressed to offer some evidence to support his assertion about Arafat's advance knowledge, in light of his and the PLO's denial of any involvement in the incident, noted that the PLO chairman had sent Mohammed Abbas, also known as Abu Abbas, the leader of a pro-Arafat wing of the Palestine Liberation Front, to Port Said to negotiate with the hijackers, who had identified themselves as members of the PLF.

"When Arafat decided the Italian liner episode had to be ended, he called for Abu Abbas to go to Port Said to direct so-called negotiations with the four terrorists," Kimche said.

Later in a briefing of correspondents, Kimche added as ostensible evidence of Arafat's direct involvement "the fact that Yasser Arafat turned to, of all groups, to Abu Abbas'. He could have turned to anybody." Kimche said Abbas' PLF is financially supported by Fatah and has its headquarters in the PLO's compound in Tunis.

Kimche dismissed suggestions by reporters that it would be natural for Arafat to turn to Abbas once the hijackers had announced publicly that they were members of the PLF. Abbas is a member of the PLO Executive Committee.