PLO Chairman Yasser Arafat said in a letter released today that he has approved the participation of Palestinians from the occupied West Bank and Gaza Strip in peace talks with Israel. It was the first formal statement by the PLO leader that he has approved terms for Israeli-Palestinian talks, although there have been hints from Cairo that he was moving in that direction. Arafat said in the letter that the PLO would prefer an international peace conference and ``guarantees that can only be provided by the great powers and the United Nations.'' But he added: ``The PLO once more leaned over backward and approved the idea of a dialogue between representatives of the Israeli government and representatives of the Palestinian people in the occupied territories and the diaspora.'' He said that such talks would have to be part of a process ``aimed at a comprehensive and final settlement'' and that its agenda ``could cover all the conceptual ingredients of that process, including the elections and the 10 Egyptian points.'' The ``10 Egyptian points'' were recommendations put forward by Egyptian President Hosni Mubarak to try to get a concensus with Israel on preliminary peace talks. Mubarak, backed by U.S. Secretary of State James A. Baker III, has offered to host an initial Israeli-Palestinian dialogue aimed at reviving stalled Middle East peace efforts. Those talks are expected to help clear the way for Israeli-proposed elections in the occupied territories leading to limited autonomy of the areas' 1.7 million Palestinian residents. Hundreds of Palestinians and more than 40 Israelis have been killed in the Palestinian uprising in the territories. Efforts to get the talks under way have been stalled by Israeli concerns over the composition of the Palestinian delegation and the agenda. Israeli, which refuses to deal with the PLO as a ``terrorist group,'' has not yet agreed to participate in the prelimintary talks urged by Mubarak. Arafat's letter was sent to a meeting in Jerusalem by Jewish peace activists called the Special Emergency World Jewish Leadership Peace Conference, which concluded Thursday. Rita Hauser, a New York peace activist who attended the conference, told reporters that the letter was received ``through a circuitious manner, via fax'' on Thursday but that conference leaders had been unable to ``get it fitted in'' amid the conference's heavy schedule. It was presented at a board meeting today of the Tel Aviv-based International Center for Peace in the Middle East, which sponsored the conference. Ms. Hauser, an attorney and head of the center's American branch, met with Arafat in Stockholm in December 1988. Hauser said she had been in fax contact with the PLO since that meeting. Shortly after their meeting, Arafat made a series of historic announcements recognizing Israel's right to exist and renouncing terrorism. Those statements led, in turn, to the United States resuming contacts with the PLO for the first time since 1975. Arafat's letter to the Jerusalem meeting of Jewish peace advocates was dated Feb. 17 and came from Tunis, where the PLO is headquartered. There was no explanation for the delay in its transmittal to Jerusalem. In the letter, Arafat repeated the PLO's call for creation of an independent Palestinian state in the occupied territories, which were captured by Israel from Jordan and Egypt in the 1967 Middle East war. ``We remain deeply convinced that the only real security guarantee for Israel lives in a peaceful settlement based on the termination of the Israeli occupation of the Palestinian and Arab territories and the acceptance of the two-state principle,'' he wrote. Arafat noted that Israel has been fearful of dealing with the PLO, and said that Palestinians had similar concerns about dealing with the Jewish state. ``Watching the convoluted maneuvers the Israeli government has engaged in and the massive obstacles with which it has littered the path to peace, the Palestinian people are not filled with confidence in the good intentions of the Israeli leaders,'' Arafat wrote. He continued: ``To them, the only guarantee of their own security and their political future lies in the full participation of the PLO in all stages of the peace process.'' Such a role has been ruled out by Israeli Prime Minister Yitzhak Shamir. In an interview published today in The Jerusalem Post, Shamir was asked what the PLO could do to make itself an acceptable negotiating partner. ``The only thing it should do is dismantle itself,'' Shamir replied. ``Because its minimal demand is a Palestinian state, and a Palestinian state cannot co-exist with Israel.''