SLOWLY, inexorably, and despite government opposition, the Palestine Liberation Organization is gaining legitimacy as a negotiating partner in Israeli eyes. While the PLO is officially rejected as a terrorist group dedicated to Israel's destruction, increasing numbers of Israelis are arguing that talks with the organization are inescapable if a workable peace settlement is to be reached with the Palestinians.
The palpable change in attitude has been accelerated by the recent changes in the PLO's political positions - specifically, its recognition of Israel and acceptance of a two-state solution to the Palestine problem.
The change, which began on the left of the Israeli political spectrum, is moving toward the center, provoking harsh responses from right-wing Prime Minister Yitzhak Shamir, who is sticking to his refusal to talk with the PLO.
Perhaps the most telling sign of the new Israeli attitude toward the PLO was the publication last week of a report by Israel's leading think tank on strategic affairs. The report said that peace negotiations would have to be held with the PLO, or at least with Palestinians identified with the organization.
The report on ``Israel's Options for Peace'' was issued by the Jaffee Center for Strategic Studies at Tel Aviv University, headed by Aharon Yariv, a former chief of Army intelligence.
``As long as the PLO maintains the moderate course it developed in late 1988, an Israeli policy that rejects unconditionally any dialogue with it does not appear to be sustainable over time,'' the report asserted. ``It would generate increasing unrest within Israel, a sharp conflict with world Jewry, and Israel's own growing isolation.''
The report, which did not rule out the eventual establishment of a Palestinian state next to Israel, was rejected by Mr. Shamir. He said its findings harmed Israel and strengthened its enemies.
Finance Minister and Labor Party leader Shimon Peres, reflecting the changes in his party, praised the report as an ``intelligent analysis,'' adding that Israel must talk to the Palestinians ``as they are - as they are organized.''
Several days earlier, two leading contenders for leadership of the Labor Party expressed similar views.
Energy Minister Moshe Shahal said he would agree to talk with PLO if it committed itself in writing to a total renunciation of terrorism, recognition of Israel, acceptance of UN Security Council Resolution 242 (which implicitly recognizes Israel), and relinquishment of the ``right to return'' of Palestinian refugees to their homes (from which they fled during the 1948 war) inside Israel.
MINISTER of Communication Gad Yaacobi said talks with PLO chief Yasser Arafat could take place if Palestinians in the West Bank and Gaza Strip chose him as their representative in an election.
Last month, several key figures of the Labor Party, including Peres's deputy and advisor, Yossi Beilin, met in East Jerusalem with leading Palestinian supporters of the PLO from the West Bank. Members of the centrist Shinui Party also met with pro-PLO Palestinians, and spokesmen for the party have already pronounced talks with the PLO as inevitable.
There also seem to have been changes in the general Israeli public's image of the PLO, moving it closer to legitimization. An important psychological hurdle was cleared last month, when Israeli journalists met and interviewed Mr. Arafat in a special press-conference in Cairo.
A segment of the press conference was broadcast on prime-time television, and the sight of Israeli reporters talking with the PLO chief did much to enhance his status as an acceptable partner for dialogue.
An earlier sign of the growing acceptance of the PLO was a public opinion poll carried out about two months ago by Yediot Ahronot, an afternoon daily, which showed that 54 percent of Israelis support talks with the PLO if it recognizes Israel and renounces terrorism.
Along with the shifts in mainstream Israeli opinion, left-wing groups have continued to push relentlessly for talks between the government and the PLO.
The Peace Now movement, which only recently began advocating talks with the PLO, is planning a ``Peace Day'' throughout the West Bank. Israelis and Palestinians will hold mass meetings in the area during a PLO-sanctioned moratorium on violent Palestinian protests.
``Yitzhak Shamir's rejectionist position does not enjoy such wide support as he would like to believe,'' summed up Israel's most respected daily, Haaretz. ``The sense of urgency is no longer felt by the extreme left alone.''