A special inquiry commission will be empaneled to investigate a politically explosive security scandal involving allegations that the chief of Israel's secret security services -- and possibly senior government officials -- covered up the beating deaths of two handcuffed Arab prisoners in 1984, informed Israeli sources said tonight.

Israel's new attorney general, Yosef Harish, who met tonight with senior Cabinet ministers at the office of Prime Minister Shimon Peres, was reported to have approved in principle the creation of the inquiry commission. It will investigate the alleged cover-up, but not the circumstances surrounding the deaths of two Palestinian terrorists who were beaten to death by security forces after they surrendered in a bus hijacking in the Gaza Strip on April 12, 1984.

Earlier, Harish said he would not formally announce a decision until Wednesday.

Harish, who was named by the Cabinet to replace former attorney general Yitzhak Zamir three weeks ago after Zamir had pressed vigorously for a police investigation into the killings and alleged cover-up, has said that the circumstances surrounding the deaths themselves had already been "too much discussed."

Most members of the Cabinet also maintained that further investigation of the events immediately after the storming of the hijacked bus by Army and security forces could compromise the effectiveness of security forces in future antiterror operations.

However, it was not known how broad the inquiry panel's mandate would be and what powers of subpoena it would have. Harish and all of the ministers were said to favor a closed inquiry whose deliberations would be kept secret.

A key issue has been whether the inquiry panel would be empowered to make conclusions and recommendations touching on possible involvement in the alleged cover-up by senior government officials.

The affair centers on allegations that Avraham Shalom, chief of the Shin Bet, Israel's domestic secret security service that is roughly equivalent to the FBI, ordered the captured hijackers beaten to death after they were led handcuffed from the bus to a field. Shalom then allegedly misled investigators by falsifying evidence, suborning witnesses and perjuring himself before two investigating commissions and an internal Shin Bet disciplinary court.

After meeting with the ministers, Harish told reporters his decision "depends on certain circumstances." That comment, coupled with a late-night appearance at the prime minister's office by Shalom, gave rise to speculation that the Shin Bet chief might resign.

There have been suggestions by senior Israeli officials, including Cabinet ministers, that the then-prime minister, Yitzhak Shamir, knew about the alleged cover-up but failed to take action to prevent it. Peres, who was told of the cover-up allegations more than six months ago by three of Shalom's former aides, rejected demands that the Shin Bet head be suspended and investigated by police, according to informed official sources.

The Shin Bet affair is one of two sensitive, security-related scandals in which Peres' coalition government is currently entangled. The other involves charges by U.S. Justice Department officials that the Israeli government deceived U.S. investigators and withheld information when it assured them last December that U.S. Navy intelligence analyst Jonathan Jay Pollard's spying activities in Washington were limited to a narrow "renegade" Israeli espionage operation conducted without the government's approval or knowledge.

Zamir stirred a storm of controversy and a national debate over the question of priority of the rule of law and Israel's security needs by insisting that Shalom be subjected to a police investigation for his role in the deaths of the two Arab hijackers.

Initially, the Israeli Army's official spokesman said that all four hijackers had died during the storming of the bus, in which a woman passenger was killed. However, when an Israeli newspaper broke censorship and published a photograph of two of the hijackers, apparently uninjured, being led away from the bus, the Army admitted that they had been subjected to interrogation before their deaths.

Last August, a military disciplinary board acquitted the Army's chief infantry and paratroops officer, Maj. Gen. Yitzhak Mordechai, of charges of violent behavior and conduct unbecoming an officer.