Exactly six years after they signed a historic peace agreement on the White House lawn, Israel and the Palestinians today reopened talks designed to bring a final settlement to the bloody dispute that has mired the Middle East in conflict for more than half a century.

Negotiators on both sides said the atmosphere for peace is more promising than it has been in several years. But the issues they must decide--Israel's borders, Palestinian statehood, the status of Jerusalem, Palestinian refugees and Jewish settlers--remain just as intractable as they have been through decades of contention between two peoples who claim the right to nationhood on the same piece of land.

Reflecting the upbeat mood, Palestinian and Israeli officials alike referred to the reopening of talks as a historic landmark, even though little actual business was done. But today's ceremony, at the Erez Crossing point between Israel and the Palestinian-ruled Gaza Strip, was actually the third attempt to initiate negotiations on the same issues since the first peace accord of September 1993. In 1996, and again last November after the Wye River Plantation accords, Israelis and Palestinians held ceremonial openings to negotiations that soon faltered.

This time, however, the talks opened with hopes stirred by Israeli Prime Minister Ehud Barak's election last May on a platform of making peace and the revival nine days ago of the interim Wye agreement on prisoner releases and Israeli troop withdrawals from the West Bank. As part of that agreement, Israel and Yasser Arafat's Palestinian Authority also have pledged to work out a broad framework for a final settlement by February and to finish the final accord by Sept. 13, 2000--one year from today.

"It is a time for peace and peacemakers," said Mahmoud Abbas, the executive committee secretary of Arafat's Palestine Liberation Organization, who represented the Palestinians at the ceremony.

Foreign Minister David Levy, who led the Israeli delegation, expressed similar aims and predicted the negotiators will meet their one-year deadline despite the difficulties they face. "With God's help," he declared, "this settlement will end 100 years of conflict, filled with suffering, between the two peoples."

Speaking before the ceremony, U.S. Middle East envoy Dennis Ross said the talks are beginning "in a good spirit," but he added: "I don't minimize the differences. I have no illusions about how difficult this will be.

Relations between Israel and the Palestinians have improved markedly over the six years since Arafat and Israeli Prime Minister Yitzhak Rabin concluded the Oslo agreement and shook hands in front of a beaming President Clinton. Most Israelis have come to accept the concept of surrendering territory to a Palestinian state; most Palestinians are willing to agree that Israel can exist on territory that Palestinians consider theirs historically.

But within those broad concessions are details that could easily frustrate the new talks. Barak issued a statement today, for instance, that seemed to foreclose discussion of issues Palestinian leaders say are essential to successful negotiations. The statement said Jerusalem must remain under Israeli control; Israel will retain sovereignty over Jewish settlements in Palestinian territory; and a future Palestinian state cannot include all the area in Gaza and the West Bank occupied by Israel since the 1967 Middle East war.

Levy repeated the same points in today's ceremony. "Israel's fundamental principle will be no return to 1967 borders," he said. "A united Jerusalem will remain the capital of the state of Israel. Blocks of settlements will remain under Israeli control. No foreign army will exist west of the Jordan River."

Similarly, Arafat seemed to lay out a tough position on a key Palestinian demand concerning the hotly contested desire of more than 3 million Palestinian refugees to return to a Palestinian state. "There is no home for the Palestinians except Palestine," he told a conference of Arab foreign ministers in Cairo Saturday.

Nevertheless, Israeli and Palestinian negotiators described the mood ahead of the talks in optimistic terms. Saeb Erekat, a senior Palestinian official and veteran negotiator, has been complimentary toward Barak, saying that unlike some Israeli leaders of the past, Barak and others seem sincere about honest negotiations.

Many Palestinians, however, say they expect that, in the end, their leaders will be forced to accept a final agreement that will greatly favor Israel. "Arafat is weak; he will accept what the West and the Israelis make him accept," said Mahmoud Abu Algorez, owner of a small hardware store in Gaza. "We will not be satisfied, and we will want more after this evil arrangement is done."

A psychiatrist who runs a large mental health clinic in Gaza, Eyad Sarraj, predicted an outbreak of violence unless negotiators can reach an agreement that most Palestinians consider fair. "If there are Jewish settlements in Gaza after the final talks, I will personally form an armed brigade to attack them," he said.

CAPTION: Palestinian radicals marked the sixth anniversary of the peace process in their own way, with a masked anti-Israel militant waving a burning Israeli flag at Al Najah University in the West Bank.

CAPTION: Israeli Brig. Gen. Dov Tzedaka and Palestinian civilian affairs official Suheir Khalaf display a map of the West Bank showing the areas from which Israeli troops are scheduled to withdraw.

CAPTION: Israeli Foreign Minister David Levy, left, shakes hands with Palestinian negotiator Mahmoud Abbas before reopening of talks at the Erez Crossing between Israel and the Gaza Strip.