JERUSALEM, JAN. 4 -- Palestinian fatalities in clashes with Israeli troops are rising sharply in the occupied territories as the army steps up patrols and toughens some of its tactics in response to growing violence, authorities say.

Over the course of the last week, at least 10 Palestinians have died in clashes with the army, most of them in the Gaza Strip. Hundreds of others have been injured in massive battles between soldiers and crowds in such places as the Gaza border town of Rafah and the Khan Yunis refugee camp.

The death and injury totals in Gaza are the highest recorded in eight months and contrast sharply with the latter half of last year, when only a handful of Palestinians were shot to death there by the army.

Army and police officials say the surging toll reflects a more aggressive policing effort by soldiers in Gaza and elsewhere, a step they say has been mandated by growing militancy among Palestinians. The combined effect of the Persian Gulf crisis and the deadly Oct. 8 Temple Mount clash between police and Arabs in Jerusalem, officials say, has returned the level of tension in the territories to the heights it reached in the early part of the three-year-old Arab intifada, as the uprising against Israeli rule is called.

"We are really frustrated and worried about the increasing number of people being killed," said Danny Naveh, spokesman of Defense Minister Moshe Arens. "For a few months we started to believe we were going in the right direction in terms of reducing the number of deaths. But now things have changed again. The army is responding to more violence in the streets."

Following the Temple Mount incident, in which police shot dead 17 Arabs on ground sacred to both Moslems and Jews, Palestinian militants and some of the organizations that represent them began attacking soldiers with guns and knives and stabbing civilians inside Israel. Three weeks ago, assailants allegedly associated with the Islamic Resistance Movement in the Gaza Strip stabbed three Jews to death in the Tel Aviv suburb of Jaffa.

Arens and Prime Minister Yitzhak Shamir have been under strong pressure from extreme rightists in the government coalition to crack down on Palestinians following the attacks, in which seven Jews have died. Though government officials say their policies have not changed, Palestinians and human rights monitors maintain that Arens has largely abandoned last summer's strategy of seeking to limit encounters between the army and Palestinians.

As part of the "wise hand" policy last year, army patrols in Rafah and other particularly volatile areas of the Gaza Strip almost ceased, and no Arabs were killed by the army in the strip for three months. Last Saturday, however, an army patrol entered Rafah and opened fire on masked youths, killing two and touching off riots in which at least two more persons died and more than 100 were wounded.

An official source said today that the army had decided to step up its activity in Rafah and other areas because the previous policy, while reducing clashes and casualties, had encouraged Palestinian militants. In addition to the attacks on Israelis, Palestinian killings of Arabs suspected of collaborating with Israel grew rapidly in Rafah after the army withdrew, the source said.

"We reduced our presence in Gaza, and the Palestinians tried to exploit it by coming out and challenging us and trying to take over," an official said. "We felt we had to act in order to prevent the situation from getting totally out of control."

Arens has also ordered tough new tactics in other areas. For the last several weeks, army snipers have been deployed along major roads in the West Bank, with orders to shoot at Palestinians who throw stones at passing Israeli cars. At least a half-dozen Palestinians have been wounded by the snipers so far, according to reports by human rights groups.

Right-wing politicians have been pressing for bigger steps, including the wholesale expulsion of Palestinian political leaders from the territories, or the prohibition of movement by Arabs from the territories into Israel. The right-wing Tehiya party recently threatened to withdraw from the government if expulsions were not carried out.

Arens and Shamir have largely resisted these pressures, and have instead embarked on a policy of expanding economic activity in the territories, their aides say. Over the last few weeks, the Defense Ministry has quickly granted permits to about 50 new factories and other enterprises in the West Bank and Gaza, and authorized the establishment of the first Palestinian-run bank.

The permits mark the reversal of a longstanding policy under which Israel inhibited economic development in the territories, in part to encourage Palestinians to work inside Israel. Officials say the new policy is intended to lay the groundwork for a steady reduction in the number of Arabs who now commute into Israel, currently estimated at 108,000.

"We want Israel to be less dependent on these Arab workers and for the workers to have less need to come to Israel, especially in Gaza," said Naveh. "This is not a process that can be carried out in one day, but we are moving in that direction."

The two most serious incidents of the last week began when soldiers opened fire on Palestinians wearing masks. Following the violence last Saturday in Rafah, an army patrol fired on three masked youths in the Khan Yunis camp Tuesday, killing two and touching off more riots. Two more persons have since died in continuing violence in Khan Yunis, one of Gaza's largest refugee camps.

For more than a year, army regulations have permitted soldiers to open fire without provocation on youths wearing masks, which are part of the uniform of the uprising's militants. But a senior defense official conceded today that the week's incidents suggested that soldiers in Gaza may be resorting to gunfire more quickly than in the past, perhaps because of fear that they may be attacked with guns or knives.

In an incident today, an Arab bus driver returning to the Gaza Strip from southern Israel swerved into the path of an army officer's car. A 21-year-old woman passenger in the army car was killed, and an army reservist riding in another car shot the bus driver to death after he leaped from his cab waving an iron bar, Israel radio said.