Saudi Arabia informed the United States Thursday that it was cutting off financial support to the Palestine Liberation Organization, a senior U.S. official said.

Prince Saud al-Faisal, the Saudi foreign minister, also responded positively to an Israeli proposal for Mideast peace talks, the official told reporters as Secretary of State James Baker flew here to discuss the peace plan with Syrian President Hafez Assad.Financial support from Saudi Arabia, Kuwait and other oil-rich Arab countries have helped make it possible for Yasser Arafat's PLO to carry out its guerrilla raids against Israel. But the Saudis were disappointed when the PLO backed Iraq in the Persian Gulf war.

U.S. officials traveling with Baker said they did not know much money the Saudis have been providing the PLO.

Whatever the Saudis' motivation, a suspension of financial support to the PLO could build confidence in Israel that Arab attitudes are changing. The question confronting Baker here is whether Assad with join in.

Baker met with Prince Saud in Cairo Thursday before flying here to see Assad Thursday night.