JERUSALEM (AP) _ An Israeli officer fatally shot a Palestinian protester in the West Bank on Tuesday, and an Israeli-owned bus was reported set ablaze by masked Arab assailants in Israel as passengers fled the vehicle.

A group of army officers' wives demanded on Tuesday that Defense Minister Yitzhak Rabin either resign or accept responsibility for orders they claimed he issued to soldiers in the occupied territories.

On Monday, the army announced plans to court martial Israeli Col. Yehuda Meir, accused of ordering troops to beat and break the legs of 20 bound and gagged Palestinian detainees in January 1988.

Meir's wife, Orna, and other officers' wives claimed Rabin gave the orders to brutalize the Palestinians.

Tuesday's violence came a day after a PLO leaflet urged Palestinians to escalate attacks on Israeli forces between Christmas and the New Year ''to honor the Palestinian revolution.''

At least 640 Palestinians have been killed by Israelis during the two-year uprising against the occupation of the West Bank and Gaza Strip.

At least 161 other Arabs have been slain by fellow Palestinians as accused collaborators with Israel. Forty-three Israelis also have died.

The latest fatality, Farraj Daher Abu Fekhaida, 26, was shot in the chest when an Israeli commander fired on stone-throwers during an army raid on the village of Jina near Ramallah, the army and Arab reports said.

The Israeli-owned bus was set on fire within Israeli territory near the West Bank town of Jenin, Israeli radio reports said.

One masked assailant held a hatchet to the driver, while two others spilled kerosene on the floor and then set the vehicle on fire, the reports said. The passengers, Palestinians going to jobs in Israel, reportedly managed to flee unhurt.

In the Gaza Strip, soldiers shot and wounded three Palestinian teen-agers in clashes in the Jebaliya and Shati refugee camps, Arab reports said.

In Jerusalem, Israeli state prosecutor Dorit Beinisch ordered further investigation into the death of a 27-year-old Palestinian who died last week in custody of the Shin Bet security agency in the Gaza Strip, the Yediot Ahronot daily said.

The prisoner, Khalid Kamel Sheikh Ali, had been detained three weeks earlier on suspicion of concealing weapons for a Moslem fundamentalist group.

Michael Baden, director of Forensic Sciences for New York State Police, who was commissioned by the victim's family to conduct an autopsy, told reporters Monday Ali died from a blow to the abdomen dealt with ''a large amount of force.''

The charges against Meir say soldiers under his command left beaten and bound Palestinians from Beita and Hawara villages in a field until other Arabs came and took them to a hospital.

Meir served as military commander of Nablus, the largest town in the West Bank, and becomes the highest-ranking officer to face trial during the uprising. He resigned from the army under pressure in April 1988.

Orna Meir, who formed the wives' group on Tuesday, said on Israel radio that Rabin was responsible for the beating orders.