JERUSALEM, SEPT. 4 -- On the right-hand side of Moshe Arens' desk, across from the framed, autographed photo of Menachem Begin, is a small plastic replica of the Lavi jet fighter. Behind the desk stands a larger model. Both are symbols of their owner's devotion to the Israeli aircraft project and both depict the plane as soaring upward.

But last weekend the Lavi came crashing down -- and in its wake may come Arens' political career. The 61-year-old former ambassador to the United States and defense minister responded to the narrow governmental decision not to build the plane by resigning from the Cabinet, saying he could not fulfill his ministerial responsibility by supporting a decision he considers "a terrible mistake."

In a coalition government noted for its leaders' imperviousness to political embarrassment, Arens' resignation was highly unusual. Although three junior ministers have resigned for political reasons in the past year, no one of Arens' senior rank and stature has done so since his mentor, Begin, stepped down as prime minister and vanished from public life in 1983.

Arens' admirers -- including many who do not agree with his rightist views -- say his resignation, which took effect today, stems from his honesty and his adherence to principles. His detractors contend it is further evidence that the former aeronautical engineer is a naive and amateurish politician who will never become prime minister.

Both camps agree on one thing: The resignation can only damage Arens politically by removing him from the scene and by making life more difficult for his closest ally, Prime Minister Yitzhak Shamir. The rival Labor Party, whose leaders pushed through the motion canceling the Lavi, is happy to see Shamir's forces in disarray. So presumably are Cabinet ministers David Levy and Ariel Sharon, the two challengers to Shamir and Arens inside the nationalistic Likud political bloc that all four men belong to.

None of this gave Arens pause. In an interview, he said he gave no thought to politics in general or his own career in deciding to step down.

"It's not relevant," he said. "There are certain times where you simply have to do what you consider the right thing to do. I was simply not capable of staying on in the Cabinet and shouldering the responsibility for what I consider to be a very bad mistake."

It is a measure of Arens' singular commitment to the Lavi project that he still talks about it as if it were extant and that he still expresses the hope that the Cabinet will reconsider, even though the votes against it are firmly locked in place. But to Arens, the Lavi is not just a project worthy of support, but rather a touchstone issue in which his own vision of Israel's greatness is at stake.

A graduate of the Massachusetts Institute of Technology and California Institute of Technology, Arens was vice president for engineering at Israel Aircraft Industries in the 1960s and early '70s, where he was in charge of beginning development of the advanced design work that later became the Lavi. As a professor at the Technion Institute in Haifa, he helped train many of Israel's top aerospace engineers.

"Many of the people involved in the Lavi program are either former students of mine or worked under my direction or both," he said. "I feel almost paternalistic toward the people working on the program. I think I understand the great blow that each and every one of them is suffering. Also, designing airplanes is my profession and I'd like to think that I have a better understanding of what's at stake here."

Arens was a key figure in getting the project off the ground. He returned from two years as ambassador to Washington to become defense minister in 1983 at a crucial point in getting U.S. approval to fund the plane.

It was Arens who asked Rep. Charles Wilson (D-Tex.) to sponsor legislation permitting U.S. aid money to be spent in Israel on the project. He also succeeded in persuading Secretary of State George P. Shultz, who became a personal friend during Arens' days in Washington, to help expedite crucial licenses to transfer technological secrets to Israel for use in the project.

The result is a sleek jet fighter that Arens contends would have been the best in the world. Its speed and maneuverability are equivalent to that of the U.S.-built F16, he says, adding, "The more important thing these days is survivability on the modern electronic battlefield -- that your aircraft is hard to see, hard to lock on and hard to hit. By those criteria, the Lavi is going to be the best plane around."

Or was going to be, before last Sunday's narrow Cabinet vote to kill it. The basic reason was cost: The Lavi had already run up a bill of nearly $1.5 billion, almost all of it in American aid funds, and some estimates warned that cost overruns could go as high as $2 billion over the next decade. Israel's Finance and Defense ministries, military high command and the Reagan administration all agreed that the price tag was too high.

Arens still disagrees. He says the challenge of the Lavi was a national one that enabled Israel to keep thousands of aerospace engineers who otherwise might have left for fatter salaries elsewhere. He disapproves of the violent demonstrations undertaken by some Israel Aircraft employes -- 100 tried to storm the Foreign Ministry here yesterday and their leaders say thousands will march on the president's office on Sunday -- but says he understands their frustrations and anger.

As for his ally Shamir, Arens concedes the prime minister is "displeased" by his resignation but said, "I think he understands why I did it. He's been around in politics a long time and he knows that sometimes problems arise and there's no point in crying over them. He'll find ways of dealing with them."

Arens says he is not worried about his political future. He says he will continue to serve as one of the top three officials of Herut, the dominant party in the Likud. He'll be high on the Likud's list in next year's planned parliamentary elections, where the bloc hopes to take advantage of the Lavi vote to score points against Labor. "There's life in politics without being a minister in the Israeli Cabinet," he says.

Others are not so sure. The resignation may show moral courage but it also shows poor political judgment, some analysts contend. Arens' political base inside the Likud is already weak and he has an image, fairly or not, of being something of a political snob. David Levy, the populistic deputy prime minister, has referred to Arens sneeringly as "the professor," contrasting his own working-class background to Arens' more cultured pedigree and style.

"Arens runs the risk of becoming the Likud's version of Abba Eban," says one analyst, referring to the Labor Party's eloquent elder statesman who is popular abroad but politically weak at home. "If he stays out of the Cabinet until the next election, it could be political suicide."