An unidentified gunman today assassinated Zafir Masri, recently appointed by Israel as mayor of this West Bank city and a symbol of efforts to revive Middle East peace talks by enhancing self-rule among moderate Palestinians in the occupied territory.

Masri, 45, who identified closely with Jordan but supported the mainstream Fatah wing of the Palestine Liberation Organization, was shot three times in the back as he walked across Nablus' busy main street from his home to the municipal building. He died shortly afterward at a nearby hospital, and Israeli troops clamped a curfew on the city while they searched for his assailant.

Masri's death dealt a severe setback to plans by Israeli Prime Minister Shimon Peres to grant a measure of political autonomy to the 1.3 million Palestinians in the West Bank and Gaza Strip by allowing them a more active role in administering their own affairs.

The assassination threw into question Israeli plans to appoint mayors in three other major West Bank towns -- Ramallah, Biera and Hebron -- and restore Palestinian leadership for the first time since virtually all the territory's mayors were deposed by the military government in 1982 and replaced by Israeli Army officers.

Some Palestinian political leaders predicted that a wave of fear would spread through the West Bank and Gaza Strip and that potential appointees to mayoral posts would be unwilling to step forward.

However, Peres, speaking to his Cabinet this afternoon, said Masri's death would not deter his government from attempting to turn over to local Palestinians increased responsibility to administer their own affairs.

Two PLO splinter factions claimed that they had ordered Masri's assassination.

In Damascus, the Popular Front for the Liberation of Palestine, led by George Habash, said it had killed Masri.

In Beirut, a caller to a French news agency who identified himself as a member of the Fatah Revolutionary Council, headed by Sabri Banna, also known as Abu Nidal, said his organization had killed Masri as a warning to PLO Chairman Yasser Arafat, Jordan's King Hussein and Israel's intelligence service, the Mossad.

Abu Nidal's group has been blamed by the United States for the hijacking of the Achille Lauro cruise ship and the attacks in December on airports in Vienna and Rome.

Both the PLO and Jordan had tacitly approved Masri's appointment. Khalil Wazir, a top PLO commander also known as Abu Jihad, denied in Amman today that there was any PLO involvement and said that the killing served only the interest of opponents to Palestinian self-determination.

Wazir noted that Masri had "strongly supported the PLO" and its political program, and he said that the "treasonous crime" would "not escape punishment by the Palestinian people."

A Jordanian government statement condemned the assassination as "a new act of criminal terrorism directed against the Palestinian cause." It said that "nationalism in the occupied territories will remain stronger than the hand of terrorism, and the culprits will not escape punishment."

Masri's assassination came just 11 days after Hussein broke off a yearlong joint effort with the PLO to reach a Middle East peace agreement with Israel, accusing Arafat of breaking his word and suggesting that local leaders in the West Bank seek ways to assert themselves in the quest for peace. Peres had said later that he would soon begin meeting moderate West Bank and Gaza Strip Palestinians in an effort to revive the moribund peace initiative.

Peres today praised Masri's political activities in Nablus since he was appointed mayor at the end of last year. Peres called the assassination "a blow to the residents of the territories and to whoever wishes to see progress toward calm and understanding."

Although Peres said he hoped that a successor to Masri could be found, some Palestinian leaders said they wondered how many people would step forward in the face of a clear danger of becoming a target for extremist Palestinian groups.

The moderate Palestinians have none of the personal protection, either from the Israelis or the PLO, that the PLO leaders have, and they live with the ever-present prospect of being gunned down by more radical Palestinians.

Fathi Fahmawi, head of the Chamber of Commerce in nearby Jenin, who has been attempting to organize a new municipal council in that West Bank city, said in an interview that Masri's death would hamper efforts to restore self-rule to Palestinians.

"If they killed Zafir Masri, they can kill others. There is fear, which will have an effect on others. The fear is spreading," Fahmawi said.

Army command sources said Masri was gunned down shortly after 8 a.m. as he walked the 100 yards from his apartment on Faisal Street to his office in the municipal building.

The mayor, a member of one of Nablus' most influential families and the city's most prominent business leader, had stopped in the middle of a service road directly in front of his office to chat with a local merchant when a lone gunman fired three shots from a 7.65-mm pistol into his back and fled toward the nearby casbah, witnesses told police.

Black flags were raised at the municipal buildings, and hundreds of mourners went to the palatial home of Masri's oldest brother, Hekmat Masri, another leading Nablus businessman. The Masris are cousins of Jordan's foreign minister, Taher Masri.

Another brother, Wahid Masri, said in an interview that the slaying had come as an "earthquake" to Nablus. "It is not just the loss of Zafir Masri. It is the loss of the free Palestinian world," Wahid Masri said. "He was targeted to be killed because he was a man of free word and free posture."

Noting that his brother reluctantly accepted the appointment of mayor, Wahid Masri said, "We shall never feel weak toward those who make such crimes. We have to continue working to help those people in the West Bank. We never thought of leaving the West Bank."

Masri, a soft-spoken and shy but articulate leader, said in a recent interview that he had accepted the controversial appointment as mayor because essential municipal services had deteriorated so much in recent years that he decided that as long as Palestinians were unable to bring an end to occupation, they should at least make life as bearable as possible for themselves.

Masri said the purpose in accepting the job was to "get the Israelis out of office in Nablus , bring back striking city employes and, after a year, hold elections. Then we can say, 'Okay, we have brought back the Arab municipality.' "

Former mayor Bassam Shaka, who was deposed in March 1982, two years after his legs were blown off by a car bomb placed by Jewish settlers, had bitterly opposed the appointment of Masri on the ground that it would prolong occupation of the West Bank. He said in an interview today, "I opposed it on principle because from the beginning we always had elected councils. This assassination has strengthened my opinion that Israel never accepted the results of a democratic election and encouraged splits among Palestinians."

The Israeli head of the West Bank's occupation government, Ephraim Sneh, called the killing "a very grave matter," and said, "Some of the extremist groups, I believe, are behind this assassination. We generally know who was against the municipality of Nablus. It is well known who was opposed to Masri. It is not a local matter, I believe."

The U.S. consul general in Jerusalem, Morris Draper, condemned "the mindless brutality" and called Masri "a man of rare talent and integrity who was dedicated to the interests of the citizens of Nablus and his fellow Palestinians." ira Kawar in Amman contributed to this article.