HANUKKAH and storytelling go together like latkes and applesauce. For eight nights -- this year it's Dec. 1-8 -- families have a great excuse for getting together and reading aloud from some of the excellent collections of Jewish short stories and folk tales.
* The best of the new lot is ''The Diamond Tree: Jewish Tales from Around the World,'' selected and retold by Howard Schwartz and Barbara Rush, illustrated by Uri Shulevitz (HarperCollins, $16.95, ages 7-10).
Schwartz has edited three anthologies of Jewish folklore for adults, including ''Lilith's Cave: Jewish Tales of the Supernatural,'' and Rush is a storyteller and children's librarian who also edited ''Seventy and One Tales for the Jewish Year: Folktales for the Festivals.'' Shulevitz won the 1969 Caldecott Medal for his illustrations in ''The Fool of the World & The Flying Ship,'' and his other award-winning works include ''Dawn'' and ''The Treasure.''
The three have collaborated on a gorgeous volume. Each of the 15 stories begs to be read aloud, and each is illuminated, not merely illustrated, by a vibrant Shulevitz watercolor. The quality of the smooth stock and the color reproduction are worthy of a book that should become an heirloom.
Most of the stories are from the Middle East and Eastern Europe, and notes at the back give details about the sources.
* If your grandfather or great-grandfather still speaks a little Yiddish, recruit him to read ''Around the Table: Family Stories of Sholom Aleichem,'' selected and translated by Aliza Shevrin (Scribner's, $11.95, ages 10 and up). Shevrin also translated ''Holiday Tales of Sholom Aleichem,'' which is now available in paperback from Aladdin.
Like its predecessor, this collection remains true to the style and pacing Aleichem -- one of the world's greatest Yiddish writers -- must have used when telling his stories aloud. At the beginning.
''Let me tell you right off that I am not a rich man. Far, far from a rich man. I have next to nothing. True, I have a family, if you can call it that . . . But when it comes to the happiness children bring, I can truly boast of having, blessed be His name, more than the richest man in Kasrilevka!''
* An abridged version of one of Aleichem's stories is now in paperback: ''Hanukah Money,'' by Sholem Aleichem, translated and adapted by Uri Shulevitz and Elizabeth Shub, illustrated by Uri Shulevitz (Mulberry Books, $3.95, ages 7-10).
If you read the story in ''Around the Table,'' you'll be disappointed in this condensed edition. The dark sides of the relatives who give the two young boys their Hanukkah coins aren't revealed. The sadness that runs through most of Aleichem's work is missing. Yet Shulevitz's sepia-toned illustrations almost make up for that: The adults have a ghostly pallor reflective of the poverty Aleichem knew as a Jewish boy growing up in the Ukraine in the 1870s and 1880s.
* Biblical scholars no doubt cringe at the thought of a book that takes women who are mentioned in the Old Testament and fleshes them out by using rabbinic sources such as the midrash. Sure, thereis some embellishment. But the result breathes life into familiar stories suddenly told from a woman's point of view.
''Miriam's Well: Stories about Women in the Bible,'' by Alice Bach and J. Cheryl Exum (Delacorte Press, $16, ages 10 and up) is packed with anecdotes and witty quotes from Rebekah, Leah, Sarah and even Lot's wife.
For instance, the story of Jacob and Esau, told in Genesis 27, is retold by their mother, Rebekah. It is she who instructs Jacob how to pass himself off as his brother in order to obtain the blessing from their father, Isaac.
At the end of each tale the authors include wonderful notes that detail sources and provide commentary. The last section of the book isn't based on research, so of course it's the most fun. In a group of short takes, the authors extrapolate stories about Job's wife, Delilah and Jezebel, among others. ''How might Job's wife have responded to the calamities that befell her husband?'' the authors ask in the introduction.
Get this book and find out. A bonus: Leo and Diane Dillon illustrated the jacket, and their simple ''decorations,'' which look like woodcuts, are interspersed throughout the book.
* If your family won't sit still for storytelling, a couple of other new books are options as presents. ''Happy Hanukkah Rebus,'' by David A. Adler, illustrated by Jan Palmer (Puffin paperback, $3.95, ages 3-8) is a simple story about a little girl who has just heard her father tell the story of Hanukkah.
The rebuses are clever and engaging for first- and second-graders, and parents who don't have the patience to think through them can turn to the second version -- without rebuses -- at the back of the book.