Israel's Cabinet split sharply today over a recommendation by the attorney general to prosecute the head of the secret internal security services in connection with an alleged coverup of the deaths in 1984 of two captured Arab bus hijackers.

The 10-member "inner cabinet" of senior ministers in the coalition government held a stormy debate over the highly classified controversy, but made no decision to limit the authority of Attorney General Yitzhak Zamir in pressing the case, a senior official in the government said tonight.

Israel's military censor barred disclosure of details of the Cabinet discussion and allegations made against the chief of the Shin Bet, comparable to the FBI.

The security chief, whose name cannot be published under censorship regulations enforceable by prosecution, has been under investigation by Zamir for several months for allegedly suppressing evidence and obstructing justice in the probe of the deaths of the two Palestinian hijackers after they were taken into custody on April 14, 1984, in occupied Gaza.

The two were captured when an Army commando unit stormed the hijacked bus. A soldier who was a passenger on the bus was killed in the attack, and authorities said they found explosive devices planted by the Palestinian terrorists.

A major controversy erupted when the Army command first announced that the two hijackers and two companions had died as a result of injuries sustained during the storming of the bus.

After an Israeli newspaper broke censorship rules and published a photo of two of the hijackers being led from the bus, handcuffed and without apparent injuries, the Army acknowledged they had been interrogated before their deaths.

Last August, a military disciplinary board acquitted the Army's chief infantry and paratroops officer of charges of "violent behavior" and conduct unbecoming an officer in the deaths of the two Arab hijackers.

The board ruled that pistol-whipping injuries inflicted on the Arab hijackers by Maj. Gen. Yitzhak Mordecai with the butt of his pistol were "not unreasonable" in light of the circumstances surrounding their interrogation. The two Arabs died shortly afterward of skull fractures.

The disciplinary board ruled that the interrogation, carried out in a field near the bus, was done "in order to obtain vital and immediate information" in time to prevent injury from a bomb left on the bus.

Before the Army's hearing, a special civilian investigating commission had recommended prosecution of Mordecai, five members of the Shin Bet and three policemen who were at the scene.

Zamir, concurring with the civilian panel's findings, cited a May 28, 1984, statement by Defense Minister Yitzhak Rabin condemning "the behavior which led to the deaths of the two terrorists, . . . behavior which clearly contradicts basic regulations and norms."

After recommending that Mordecai and the five Shin Bet agents be prosecuted, Zamir came under intense criticism from rightist members of the parliament, some of whom urged that he be fired.

Since then, several Cabinet ministers -- most recently Justice Minister Yitzhak Modai -- have publicly urged that the powers of the attorney general be curtailed. Three months ago, Zamir said he intended to resign as soon as a replacement was found.

Prime Minister Shimon Peres tonight was reported by Israeli television to have said that there was a "legitimate difference of opinion" in the Cabinet over the incident, but that "security considerations" had to be given preference.

Following the ministers' meeting, Cabinet Secretary Yosi Beilin tersely told reporters, "At today's meeting of the government the prime minister reported on the discussion held this morning on the matter of the senior official. The government received the report sitting as the Ministerial Committee of Defense."

Disclosure of details of such meetings can lead to prosecution.

Cabinet sources said that ministers opposing curtailment of Zamir's intention to investigate and prosecute the chief of the Shin Bet included Energy Minister Moshe Shahal, Economics Minister Gad Yaacobi and Communications Minister Amnon Rubenstein.

A senior government official said tonight, "The whole issue was obviously very sensitive. The critical statements that are being made by some ministers are being based on information that is highly classified. There are some ministers who know and some ministers who don't know. I can't discuss it beyond that."

The Associated Press reported from Jerusalem:

British Prime Minister Margaret Thatcher, visiting Israel, met with Peres and said later that she would convey Israel's views on the need for Middle East peace negotiations to King Hussein of Jordan when he visits Britain next month.

British sources said Thatcher pressed Peres to relax Israel's military occupation in the West Bank and Gaza and allow elections there.