Egyptian and Palestine Liberation Organization officials stressed today the importance of PLO Chairman Yasser Arafat's repudiation of terrorism in the "Cairo Declaration" he made yesterday and played down a point that could be interpreted as a vague recognition of Israel.

In yesterday's statement, Arafat condemned "all forms of terrorism," pleged to punish terrorists and drew a distinction between military operations inside Israeli-occupied territories and those committed outside, which he denounced.

It was not clear whether he meant that PLO military operations would be restricted to the West Bank and Gaza Strip, or whether he considered all of Israel occupied territory. In an interview with the Cable News Network, Arafat said he meant "Palestinian occupied territories, according to United Nations resolution."

There are several U.N. resolutions on the Palestinian issue, including a 1947 plan that envisaged a Palestinian state covering considerably more land than just those territories taken by Israel in 1967.

Arafat refused to clarify his reference to U.N. resolutions. A senior adviser to Egyptian President Hosni Mubarak said yesterday that the declaration meant that operations would be carried out only in the West Bank and Gaza Strip.

Although his position is vague, it appears that Arafat supports the cessation of PLO military operations in some parts of Israel, which could be interpreted as recognition and might used by the Egyptians as an opening to try to bring the PLO into negotiations.

But one western diplomat in Cairo was skeptical of that possibility. The diplomat, who termed the declaration "moderately encouraging," said "one is assuming far too much to take that step," namely, to imply recognition of Israel.

Statements by Egyptian officials today focused on the public stance of the PLO against terrorism and did not refer to the question of what constitutes occupied territory.

"Let's underline this clear statement against terrorism," said Mamdouh Beltagi, director of the Egyptian state information office, adding, "This will be a fine first stage."

Foreign Minister Esmat Abdel-Meguid, who met with Arafat and other PLO representatives today, said that the PLO position against terror will "promote the peace process" and that Egypt "will go ahead with the clarification of the PLO's stand for all the parties concerned."

Israeli Foreign Minister Yitzhak Shamir was quoted Friday as saying that Arafat's declaration amounted to support of terrorism against Israel, The Associated Press reported. "It is permitted to murder Jews, but not to commit terrorist acts in Europe, because that bothers Europeans," Shamir was quoted in the daily newspaper Maariv.

[In Washington, State Department spokesman Bernard Kalb said that whether the declaration "furthers the objective of removing violence from the Middle East equation will have to be judged by the evolving situation on the ground."]