BAGHDAD, IRAQ, MAY 31 -- Chairman Yasser Arafat said tonight that the Palestine Liberation Organization's "institution and official forces" had no connection with Wednesday's attempted terrorist attack on a crowded Israeli beach resort. Therefore, he said, he saw "no reason" for the United States to halt its dialogue with the PLO, but he refused, under questioning, to condemn the raid.

The United States continued today to turn aside calls to end the dialogue, but U.S. officials said President Bush almost certainly will be forced to halt the contacts if Arafat does not issue a condemnation and discipline those responsible.

The U.S. officials, who asked not to be identified, said Arafat's remarks at a Baghdad press conference were what one called "totally unsatisfactory" in light of Bush's own condemnation of the raid as a "cowardly attempt to target innocent people."

In Jerusalem, Avi Pazner, spokesman for Israeli Prime Minister Yitzhak Shamir, called Arafat's statement that the PLO was not responsible for the raid "an outrageous lie," the Reuter news agency reported. "It's not his first or his last," Pazner said.

Israeli air and naval forces intercepted two boatloads of heavily armed Palestinian guerrillas Wednesday morning, killing four in a firefight ashore and capturing the other 12 aboard the vessels. There were no Israeli casualties.

The Palestine Liberation Front, a radical PLO faction that opposes Arafat's more conciliatory policies, has claimed responsibility for the mission and said the intent was to avenge the slaying of seven Arabs on May 20 by an Israeli Jew described by Israeli authorities as deranged.

Since that incident, a number of extremist Islamic groups have issued public threats against Israelis and Americans, and the State Department today issued a new advisory to U.S. citizens traveling in the Middle East to take precautions for their safety.

In Baghdad today, Arafat said: "We, as the PLO, have no responsibility for {the PLF operation} and have no connection with it. I'm talking about the institution and official forces which belong to the PLO." But he said he could not personally expel the PLF's leader, Abul Abbas, from the PLO's executive committee, and he called on the United States to halt what he called its support of Israeli "genocide" against Palestinians in the occupied West Bank and Gaza Strip.

The U.S. officials said, however, that Arafat apparently spoke to reporters before the U.S. ambassador to Tunisia, Robert Pelletreau, had been able to inform him of what the United States expects the PLO to say and do in order to continue the 18-month-old dialogue.

For that reason, the officials said, the Bush administration wants to be sure Arafat is fully aware of how seriously Bush regards the situation and to give Arafat what one official called "another chance to offer an explanation that is more forthcoming in terms of what we need to continue the dialogue."

Until then, the officials said, the administration will stick with White House press spokesman Marlin Fitzwater's statement today. Asked whether continued contacts with the PLO were under review, Fitzwater replied: "No, not at this point, because we want to investigate the information and reach conclusions about what happened and who was responsible and why before we would try to change our policy in any way."

The U.S. sources stressed that for Bush and Baker to be able to justify more talks after Wednesday's incident, the PLO leadership will have to denounce the attack publicly and unequivocally, dissociate the PLO from all such terrorist actions against Israel and punish Abul Abbas by expelling him from the PLO executive committee.

While Arafat failed to do any of these things at his news conference today and the sources said they do not expect him to change course, the administration wants to give him the chance, they said. A decision about continued contacts is not likely until after the U.S.-Soviet summit meeting ends Sunday.

Under questioning from reporters here, Arafat repeatedly side-stepped making an outright condemnation of the attempted attack. When asked if he regarded the raid as a terrorist activity, he responded, "The results of an action determine whether it's terrorism or not."

"What do you call the seizure of Beirut?" he asked, referring to Israel's invasion of Lebanon in 1982. "What do you call the occupation of south Lebanon? What do call the continuing occupation" of the West Bank and Gaza Strip?

Referring to American officials' statements that the U.S.-PLO dialogue might be jeopardized if he had any involvement in the attempted attack, Arafat said, "I was expecting such an American stance."

He criticized what he called "the genocide the Israelis are committing" in the occupied territories, adding: "With this situation, the Americans are increasing their support to the Israeli government."

PLF leader Abbas, who U.S. officials say was the mastermind behind the 1985 hijacking of the Achille Lauro cruise ship in which an American was killed, has been on the PLO's top decision-making body, an executive committee of about 18 members, since 1987.

Abbas, who has a residence here and receives support from Libya, rejected Arafat's 1988 renunciation of terrorism that led to the opening of official diplomatic contact between the United States and the PLO.

Abbas was nominated by the PLF to represent it on the executive committee, whose seats are allocated among the PLO's member factions. His nomination was approved by the PLO's larger representative body, the Palestine National Council, considered by the PLO as its parliament in exile.

Asked whether he would now consider expelling Abbas from the PLO, as has been requested in the past by the U.S. government, Arafat replied: "It seems you are not with democracy. Abul Abbas was elected not by me, {but} by the PNC. The PNC has to see to Abul Abbas, not me. We are a democratic organization and . . . this has to be referred to the PNC."

The State Department, in a March 19 report to Congress, said it had "no evidence" that Arafat had "authorized or approved" attacks on Israel since his 1988 renunciation of terrorism. However, dissident PLO factions that did not accept that decision have continued to launch attacks against Israel. Arafat has taken the position that he cannot control all the PLO's factions, and he has been reluctant to expel those groups, partly because his decision to seek a negotiated settlement with Israel has not produced any political results for him.

U.S. officials and diplomatic sources said in Washington that the Bush administration wants to continue the dialogue with the PLO as a means of drawing it into tacit support of Secretary of State James A. Baker III's efforts to revive the Middle East peace process.

Sharp criticism of Arafat's position also came today from Menachem Z. Rosensaft, president of the Labor Zionist Alliance and one of five American Jews who met with Arafat in Stockholm in late 1988. Arafat's assurances then that he would renounce terrorism and recognize Israel's right to exist paved the way for the United States to open the dialogue.

Rosensaft said Arafat's failure to condemn the attack "violates his statements to us in Stockholm about renouncing terrorism. . . . Under those circumstances, I believe the U.S. government must seriously reassess and probably should abrogate its dialogue with the PLO."

Arafat's remarks in Baghdad came a day after the close of an Arab League summit here at which Arab leaders charged the United States with "a major responsibility" for Israeli policies that they said were threatening "an explosion" in the Middle East.

The summit, which was hosted by Iraqi President Saddam Hussein, also pledged to support the PLO financially with millions of dollars, most of it from oil-rich Persian Gulf nations.

Staff writer John M. Goshko contributed to this article from Washington.