Prime Minister Bettino Craxi declared tonight that evidence produced by the United States for the arrest of Mohammed Abbas, a Palestinian whom Washington charges with masterminding the hijack of an Italian cruise ship, was insufficient to hold him under Italian law.

Defending his government's decision to allow Abbas to leave Italy Saturday despite U.S. requests for his arrest, Craxi told his inner cabinet that a second reason for not arresting Abbas was that he had been covered by Egyptian diplomatic immunity the whole day and a half he was in Italy.

Craxi's office issued the text of the prime minister's declaration to the inner cabinet in the four-hour meeting, called to debate the government's handling of the Abbas affair in the light of bitter criticism from three of the five parties making up the fragile, five-party ruling coalition.

Defense Minister Giovanni Spadolini, of the Republican Party, has attacked Craxi's decision to let Abbas leave and charged that Craxi failed to consult before doing so. Spadolini boycotted tonight's meeting to dissociate his party from the government's handling of the affair.

Spadolini's boycott stopped just short of triggering a governmental crisis that could have brought down the government -- although Italian political analysts did not discount that such a crisis could result from debate of the issue in parliament Thursday.

Craxi's defense before his colleagues tonight hinged mostly on his insistence that Washington had failed to come up with enough evidence to justify Abbas' arrest and that arrest in any case would have violated Abbas' diplomatic immunity, as provided by Egypt.

The United States has not made its evidence public, nor did Craxi in the summary issued by his office.

Abbas, 38, the leader of a Palestine Liberation Front faction of Yasser Arafat's Palestine Liberation Organization, was brought to Italy Friday in an Egyptian airliner that had been intercepted by U.S. Navy jets. Also aboard were the four hijackers of the cruise ship Achille Lauro.

Abbas, Italian officials maintain, was one of two PLO officials on board the Egyptian Boeing 737 who had helped negotiate the hijackers' surrender after Italy asked Arafat to help.

Recapping how President Reagan had telephoned him at about midnight Thursday to ask permission for the intercepted Egyptian jet, and its U.S. escorts, to land at the joint U.S.-Italian Sigonella naval airbase in Sicily, Craxi said, "it had to do with an airliner on an official mission, thus one covered by diplomatic immunity and extraterritorial status, on land as well as in air."

Craxi claimed tonight that Abbas, who he said carried an Iraqi diplomatic passport, and his fellow PLO official never left the plane during their stay in Italy and thus never left Egyptian diplomatic cover.

Craxi said that although Abbas and the other PLO official were "asked to descend" from the Egyptian plane at Rome as "guests" of the Italians, they did not do so.

The two PLO officials departed from Rome late Saturday on a Yugoslav aircraft, and Craxi did not explain how this transfer of the two officials from the Egyptian aircraft to the Yugoslav plane took place.

Craxi said Egyptian President Hosni Mubarak had expressed fears that the Egyptian plane could be intercepted a second time by the Americans if it left Rome for Belgrade. He said the Egyptian plane had arrived at Sigonella escorted by two U.S. military C141 jet transports and that it had 10 armed Egyptians aboard guarding the Palestinians.

Craxi denied published reports that there was "tension" between U.S. and Italian troops at the air base in Sicily.

The prime minister's explanation came as magistrates interrogating the four captured hijackers issued arrest warrants for two alleged accomplices, who were also accused of having been involved in the hijacking of the Achille Lauro.

Sources close to Genoa magistrate Luigi Carli said that at least six persons had planned the operation. Carli had been interrogating the hijackers in Syracuse, where they have been jailed since Friday.

According to the Genoa magistrate, five young Arabs made up the initial commando force that boarded the ship in Genoa Oct. 3. For reasons that were not immediately clear, the judicial authorities said, the fifth commando had walked off the ship at Alexandria harbor shortly before the ship was hijacked between Alexandria and Port Said, in Egypt.

A sixth member of the group, the judicial authorities said, was believed to be a young Palestinian arrested with two false passports in Genoa five days before the cruise began.

The four alleged hijackers from the ship were transported to a maximum-security jail somewhere on the Italian mainland tonight to await trial, according to judicial sources in Sicily.