The Justice Department has withdrawn the arrest warrant it issued with great fanfare two years ago for Mohammed Abbas, wanted in connection with the 1985 hijacking of the Italian cruise ship Achille Lauro and the murder of an American passenger, a department spokesman said yesterday.

Spokesman Patrick S. Korten said the warrant was withdrawn Nov. 9 after a review of the case and after Abbas was convicted and sentenced in absentia in an Italian court.

The decision was decried by the daughters of the slain American, Leon Klinghoffer of New York, and by two American survivors of the ship takeover. They said Abbas should be held accountable in U.S. courts.

Abbas' whereabouts are not known, although he was reported last year to be in Baghdad, Iraq.

"We do periodic reviews of outstanding indictments to see what we have to support arrest warrants and we concluded at this point we do not have the evidence to win in an American court," Korten said.

He said that since Abbas was convicted in absentia in Italy, it was not critically important to have a conviction in the United States. The Italian tribunal was able to consider some evidence that could not be used in U.S. proceedings, the spokesman said.

Abbas, who is also known by the code name Abul Abbas, is still subject to arrest in Italy, Korten said.

He said there had been no plans to announce the withdrawal of the arrest warrant, but that the State Department decided to make the information available because Italian Foreign Minister Giulio Andreotti had mentioned the withdrawal in public.

Klinghoffer's daughters, Ilsa and Lisa of New York, appealed last night "to the president of the United States to have the Department of Justice retract the decision."

"This was forfeiting our right for our father's murderer to be held accountable in an American court of law. We see no purpose served by abandoning the warrant and we appeal to the president to have the Department of Justice retract the decision," the daughters said in a statement read by Letty Simon, a family spokeswoman.

Simon said the daughters "were much distressed about this, frankly. To withdraw the arrest warrant, they said, is to abandon the search for Abul Abbas and to ignore the barbaric act of terrorism and taking the life of an unarmed U.S. citizen."

She said they also said they were disappointed that the U.S. government had not informed them that the case was being dropped.

Viola Meskin of Union, N.J., one of the passengers on the ship, lamented the fact that Abbas remained at large.

"He certainly was the mastermind; there was every evidence he was," she said. "Why should he go free? The ones that did it were just his little puppets."

Abbas was accused by Italy and the United States of masterminding the Oct. 7, 1985, hijacking of the Achille Lauro and the holding of its passengers for 52 hours by PLO terrorists. During that period, Klinghoffer, who used a wheelchair, was killed by the hijackers.

The incident ended dramatically a few days later when an Egyptian airliner carrying several suspects in the case was intercepted by U.S. Air Force fighter jets and forced to land in Italy, where the alleged hijackers were arrested.