JERUSALEM--The Foreign Ministry early today declined comment, but an official said Israel had no advance warning of the U.S. decision to open a dialogue with Yasser Arafat's Palestine Liberation Organization.

"We will examine what [U.S. Secretary of State George P.] Shultz says and what Mr. Arafat said, and then the Foreign Ministry will react," said Foreign Ministry Spokesperson Alon Liel.

An official who spoke on condition of anonymity said neither Shultz nor other U.S. officials had consulted Israel before the move. "Not at all," he said.

The Foreign Ministry is headed by Shimon Peres, head of the left-leaning Labor Party, which has been more flexible on the issue of talking to the PLO than the right-wing Likud bloc led by Prime Minister Yitzhak Shamir. Shamir has ruled out any contact.

Binyamin Netanyahu, a former U.N. ambassador and close associate of Shamir, said the decision was a "terrible mistake."

"The United States has breeched its policy [of not talking to the PLO] and the credibility of the United States has been compromised," said Netanyahu, a Likud bloc parliament member.

"The American government has been either duped, or they are deceiving themselves. The American government will regret what they have done once they realize who they are dealing with," he said in a telephone interview.

An official who spoke on condition of anonymity said Israel believed Arafat failed to fulfill the conditions laid down by the United States for recognition of the PLO, both in his address to the United Nations on Tuesday or at a news conference in Geneva yesterday.

"There were slight changes in the press conference, but we feel that he did not meet the conditions," said the official. "But I must emphasize that these are American and not Israeli conditions."

Israel never agreed to any contacts with the PLO regardless of its statements on recognizing Israel, abandoning terrorism and accepting U.N. Security Council Resolutions 242 and 338.

The resolutions call for Israeli withdrawal from occupied land and guarantee the rights of all states in the region to have secure borders.

Israeli officials contended Arafat did not fully renounce terrorism because he praised the Palestinian uprising, in which Arabs have staged violent riots and attacked Israelis with firebombs and other weapons.

"On the issue of terrorism, Arafat praises the intefadeh [Palestinian uprising]," said the official.

He also said Israel objected to the PLO's acceptance of U.N. resolution 242, because it linked its agreement to a declaration made by the Palestine National Council in Algiers last month.