JERUSALEM, FEB. 24 -- Palestinian villagers in the occupied West Bank today lynched an Arab man accused of collaborating with Israeli security forces after he shot dead a 4-year-old boy and wounded at least 13 others when he came under attack for trying to break up an anti-Israeli protest.

The incident, which took place in Qabatiya, 15 miles north of Nablus, marked the first killing of an alleged "traitor" since the Palestinian uprising began in the West Bank and Gaza Strip 11 weeks ago. Israeli military sources said they feared the death could open a new phase of "settling accounts" against Palestinians who either cooperate with Israel or refuse to honor the strikes and boycotts ordered by leaders of the uprising.

Details of the incident were still sketchy tonight, but the Army confirmed the killings of both the child and the alleged collaborator, identified by news services as Mohammed Ayad.

Army and Palestinian sources agreed that the incident began this morning when hundreds of Palestinians began a protest march through the village, scene of several violent clashes between soldiers and stone throwers in recent weeks.

The Palestinian sources said the man, allegedly well-known in town for cooperating with Israeli authorities, sought unsuccessfully to break up the protest and opened fire with an Uzi submachine gun when he came under attack. He sprayed the crowd with bullets, killing the boy and wounding 13 to 15 others.

Military sources said it was not immediately clear whether the man was licensed to own and carry the weapon. Such licenses are granted only for self-protection to a handful of Palestinians whose lives are endangered because they work with the security forces, the sources said.

Witnesses said the crowd chased the man back to his house, which they eventually burned down after allowing his mother, wife and children to escape. The villagers then dragged the man's badly burned body to an electricity pylon on the outskirts of town where they strangled him with wire and hanged him along with a banned Palestinian flag.

Witnesses said the body was left hanging for several hours until a patrol of soldiers arrived and cut it down.

The hanging follows escalating demands in political leaflets and clandestine radio broadcasts that all Palestinians honor the commercial strikes and other protests.

These demands and threats against alleged collaborators are part of the changing face of the uprising, which began as a spontaneous explosion of anger against Israeli occupation but now has become a highly organized campaign of attrition waged largely between supporters of the Palestinian Liberation Organization, which Israel has outlawed, and the security forces.

Many activists contend that wrecking Israel's elaborate network of informers and collaborators is a key part of their struggle.

This week the campaign has focused on protests against the coming visit of Secretary of State George P. Shultz, who is due to arrive here Thursday in an attempt to launch a Middle East peace initiative.

Acting on directives from a leaflet issued by a clandestine PLO-dominated committee called the Unified National Leadership for the Uprising, Palestinians today closed down virtually all shops, businesses and transportation in the West Bank and Gaza, and almost all the estimated 120,000 Arabs who work in Israel stayed home.

Those who sought to circumvent the directives have been warned. Street vendors in East Jerusalem's Old City, who did a thriving business last weekend while shops remained closed, received leaflets yesterday instructing them to close. None were visible today.

At the same time, Gaza residents working in Tel Aviv, Israel's largest city, have received threatening phone calls warning them to leave their jobs and return home. Taxis and buses came to a virtual standstill in Gaza today, and the streets were deserted after leaflets warned that any cars caught on the roads would be burned.

Those accused of cooperating with the U.S. government also have come under threat. Slogans sprayed on the walls outside the office of East Jerusalem newspaper editor Hanna Siniora, denouncing him as a traitor to the Palestinian cause after he and Gaza lawyer Fayez Abu Rahme went to Washington earlier this month to meet with Shultz.

Siniora and Abu Rahme originally hoped to convene a group of prominent local Palestinians to talk with Shultz on Friday but they backed off this week after the PLO warned against the meeting.

"We know what to do about collaborators," said a young street activist named Rayed in the Balata refugee camp in the West Bank last week. "Some have been beaten but no one has been killed. We beat these guys after they refused to heed many, many warnings."

The Damascus-based radio Quds (the Arabic name for Jerusalem), operated by the Popular Front for the Liberation of Palestine -- General Command, headed by Ahmed Jibril, has broadcast the names of several people it claims are collaborators. It also has called for the estimated 17,000 Palestinians who work for the military administration in Gaza and the West Bank to quit their jobs. So far only a handful of Arab city council members have resigned.

The Army also reported what it said may be the first armed attack against the military during the uprising. A spokesman said that a bomb exploded on a road near Gaza as a military vehicle was passing last night and that shots were fired. No one was injured and the attackers escaped, the spokesman said.

Meanwhile, Israel's inner Cabinet adjourned today after Prime Minister Yitzhak Shamir's hawkish Likud bloc and Foreign Minister Shimon Peres' more dovish Labor Alignment failed to agree on a joint policy position to present to Shultz.

Israeli officials said Peres and Shamir will meet separately with Shultz at the start of his visit and each night after he returns from day trips to nearby Arab capitals.