JERUSALEM, JUNE 4 -- A prominent Palestinian newspaper editor, known as a moderate supporter of the outlawed Palestine Liberation Organization, today said he would break a 20-year-old Arab political boycott here by heading a slate of candidates in next year's Jerusalem City Council elections.

Hanna Siniora told foreign correspondents at a meeting here that the time had come for Palestinians to participate in local elections in order to persuade Israel that they can play a positive role in reviving the moribund Middle East peace effort and that they are a political force to be reckoned with.

Palestinians in predominantly Arab East Jerusalem have long debated this issue among themselves but no one has ever come forward before to declare a candidacy. Siniora's statement was immediately denounced by several other Palestinian leaders at the session, reflecting deep divisions in the community on the issue. They said such a slate would be tacit recognition of Israel's claim to have annexed the Arab sector of the city after the Six-Day War in June 1967.

"No, no, no," cried out Radwan Abu Ayash, president of the Arab Journalists Association, who denounced Israelis as "racists" and added, "Our task is to end Israeli occupation, not to run for office. We'll never get anything out of participation."

But Siniora, editor of the Arabic daily Al Fajr, said his candidacy would not mean that Palestinians were renouncing their claims to Jerusalem. The future of the city, he said, should be decided in negotiations between Israelis and Palestinians.

"I would like to keep the city undivided, {but} at the same time the city should also be the future capital of both the Palestinian and Israeli states," he said.

Jerusalem's 135,000 Arab residents, about 30 percent of the total population of 460,000, have long complained that they pay exorbitant taxes for city services far inferior to those given the Jewish majority. Siniora said he believes his slate can win up to seven seats on the 31-member council, enough votes possibly to hold the balance of power between the various Jewish factions and thus obtain more services for the Arab sector.

Jerusalem was physically divided between Israel and Jordan during the first 19 years of Israeli independence. The barriers came down in 1967 after Israel's military triumph and Palestinian residents were given the option of accepting Israeli citizenship or retaining their Jordanian passports. Virtually all of them chose the latter. Even so, they were given the right to vote in city elections and about 20 percent of eligible Arab voters have done so regularly, although none has run for office.

Friday is the 20th anniversary of the beginning of the war and many Palestinian shops were shuttered today in anticipation of a general strike called throughout the occupied territories.