The Federal Trade Commission's nine-year-old landmark controversial antitrust suit against the nation's three largest cereal companies moved a large step closer to ending yesterday as the FTC staff served notice that it no longer intends to appeal an FTC law judge's ruling that the case to be dismissed.

The staff's motion to withdraw its own appeal was filed yesterday afternoon even though the agency was without federal funds and lawyers were supposed to be conducting no official business, except for closing the agency.

However, according to one commission official, the staff had to file its motion yesterday to keep an agreement with the three affected cereal companies, Kellogg Co., General Mills Inc. and General Foods Corp.

Under the agreement, the commission staff no longer will appeal the judge's ruling as planned. At the same time, the cereal companies will drop one of their charges that lies at the heart of their appeal--that the FTC committed a major procedural error during the trial by granting a lucrative contract to the administrative law judge who was hearing the case in order to keep him from retiring and prolonging the already lengthy proceeding.

Because the budget impasse forced the agency to order its employes to leave early yesterday afternoon, there were no staff laywers available to explain the agreement. Nor was the public reference room open to let the public view the agreement.

Under the agreement, the FTC commissioners now have 10 days to decide whether they want to let the suit die where it is--or hear oral arguments in the case first.

One high-level official predicted that the commission still may order the staff to prepare an appeal--despite the staff's motion.

Although the official predicted that the ultimate result of the case will be the same as the judge's ruling, he predicted that the commission may want to hear oral arguments, even though the staff wants to drop the appeal.