Israeli Defense Minister Yitzhak Rabin said yesterday his government must decide soon whether to continue its effort to develop the Lavi jet fighter or cancel the project and rely on U.S.-made planes for the Israeli Air Force over the next 25 years.

"In the cabinet, we have come to the conclusion that we have to decide either-or," Rabin said of the Lavi project, whose future is a matter of great political sensitivity in Israel because it involves about 10,000 jobs.

At a breakfast meeting with reporters, Rabin said his talks with senior U.S. officials this week had been devoted to getting "a sense of what will happen if we go this way or that way" on the Lavi.

Pentagon officials said that Defense Secretary Caspar W. Weinberger has agreed in principle to provide a multimillion dollar package of concessions to Israel as a price for halting the Lavi, United Press International reported.

But Weinberger rejected Rabin's request to increase the $1.8 billion a year Israel receives in military aid as one means of compensating the Jewish state for giving up the fighter bomber, UPI said.

The United States already has contributed more than 90 percent of the Lavi project's $1.46 billion in development costs.

Sources familiar with Rabin's discussions here said he sought assurances that if the Lavi were canceled, Israel's annual allotment of U.S. military aid would not be cut. Weinberger, UPI reported, expressed willingness to help Israel offset losses if the Lavi is canceled.

The "offset" arrangements require U.S. companies selling arms to Israel to spend up to $150 million in Israel and permit Israel to spend $300 million in aid at home, not in the United States.