Palestine Liberation Organization Chairman Yasser Arafat declared today that the PLO "denounces and condemns all terrorist acts" outside occupied Arab territories, but he said that Palestinians would retain the right "to fight against the Israeli occupation in all possible ways."

He also said that "the PLO, as of today, will take all punitive measures against violators" of the guidelines he was declaring.

Top PLO and Egyptian officials said Arafat's statement, issued after two days of talks here, was meant to rule out terrorism within Israel proper, but his language was unclear and an Israeli spokesman said that he saw nothing new in the statement.

A renunciation of violence is one of two conditions set by the United States for talks with the PLO. The other is recognition of Israel's right to exist as a state, a subject not directly addressed by Arafat today, although an aide said that his statement implied such recognition.

While Arafat's statement fell short of what U.S. and Israeli officials have sought, Egyptian and PLO officials indicated here today that it should be seen as a move in that direction.

PLO spokesman Ahmed Abdul-Rahman told Reuter that he now expected the United States "to quickly reassess its anti-PLO campaign."

Although Arafat has denounced terrorism before, it was the first time he was so explicit, ruling out civilian targets and pledging to punish violators.

Egyptian President Hosni Mubarak, who stood at Arafat's side as he read the statement, had been pressing the PLO leader to make such commitments during their talks, which began Tuesday, Egyptian officials said.

Reading a prepared statement following a four-hour meeting with Mubarak, Arafat said, "The PLO denounces and condemns all terrorist acts, whether those by countries or by persons or groups, against unarmed civilians in any place."

He drew a distinction between operations conducted inside Israeli-occupied territories, which he said were justified, and those committed outside, which he condemned.

Palestinians historically have referred to both Israel, which was created in 1948, and the territories it captured in the 1967 Middle East war as "occupied Palestine." But Egyptian and PLO officials questioned about Arafat's language today said his description of the areas approved for fighting included only the territories seized in 1967.

A senior PLO official close to Arafat said, "If we meant inside 1948 [boundaries], we would have used a different formula."

Egyptian presidential adviser Osama Baz, asked by Reuter whether Israel itself constituted occupied Arab territory in Egypt's view, said, "No, Israel is not part of the occupied Arab territory." Asked if Arafat's declaration meant that PLO operations would be carried out only in the West Bank and Gaza, Baz replied, "Yes."

[In Jerusalem, Israeli Foreign Ministry spokesman Avi Pazner said that Israel questioned Arafat's declaration because the PLO leader had never acknowledged using violence outside Israeli-occupied territory, Reuter reported. Pazner characterized it as "playing with words" and said he saw "no change at all" in it.]

Some observers saw the language used by Arafat as implying Israel's right to exist within its pre-1967 borders.

But the senior PLO official, when asked about this, said, "We did not say that frankly. It is a matter for the future, because we cannot recognize any borders for Israel until Israel recognizes our rights."

Like Jordan's King Hussein, Mubarak has been anxious to pull together shattered fragments of the peace process, which the two moderate Arab leaders view as vital to the stability of the region. Both have been looking for some concession from the PLO to improve its credibility in the eyes of the international community and open the way to negotiations.

In a possible reference to the Achille Lauro hijacking, in which an American Jewish invalid was killed, Arafat said, "Incidents have affirmed the PLO's conviction that terrorist acts committed outside Israeli-occupied territories have adverse effects on the Palestinian people's cause and disfigure their legal resistance for freedom."