Attorney General Edwin Meese III has made a tentative decision to close the Palestine Liberation Organization's observer mission to the United Nations in New York over the strong objections of the State Department, according to congressional and Justice Department sources.

The sources said the Justice Department's Office of Legal Counsel has concluded that the administration should abide by legislation Congress passed in December declaring the PLO a "terrorist organization" and ordering its New York office closed by March 21, even if this conflicts with U.S. international obligations to the United Nations.

But State Department officials insisted yesterday that Meese has "not made any kind of decision yet," and predicted none would be announced before next week.

White House spokesman Marlin Fitzwater said discussions between the State and Justice departments over the PLO mission's closure had been "intense" the past few days. But he said no final decision had been made yet.

The Arab League's ambassador here, Clovis Maksoud, denounced the reported decision as "regrettable, most unfortunate" and charged it was "a total violation" of the U.N. charter.

Arab diplomats have been warning that a U.S. decision to close the PLO mission could provoke a special session of the U.N. General Assembly, possibly held in Geneva rather than New York, to condemn the action.

Arab American Institute Executive Director James J. Zogby issued a statement saying the decision left the Reagan administration's Middle East policy "in shambles" coming just as Assistant Secretary of State Richard W. Murphy's is visiting the region to seek support for a new peace initiative.

Rep. Jack Kemp (R-N.Y.), a chief sponsor of the legislation demanding the PLO office's closure, hailed the Justice Department's reported decision and said it would send "a strong signal" to the world that the United States was waging a war against terrorism.