The Federal Aviation Administration wants to enclose Washington National Airport's observation deck and convert it into a mini-mall of nine retail shops.

But the plan has touched off a dispute with Arlington County residents and federal planners.

The FAA proposal was placed on the agenda of the National Capital Planning Commission, which is charged with protecting the federal interest in Washington.

But the FAA withdrew the proposal before last Thursday's NCPC meeting for unexplained reasons. The NCPC staff had recommended that the commission reject the National Airport proposal.

The plans submitted by the FAA call for enclosing the observation deck, which is 16 feet wide and 190 feet long, with glass panels to create a row of small shops that would double the number of shops at the airport. The FAA estimated the project would cost between $200,000 and $300,000.

However, in a strongly worded statement, NCPC staff said the proposal would be "inconsistent" with the "federal facilities" element of the city's comprehensive plan. The staff said National Airport "should be phased out as a major commercial airport" and therefore "any capital improvements to the terminal facilities or grounds at Washington National Airport should be minimal.

"It has been commission policy that all proposed improvements at the airport be limited to those essential to safe operating conditions and general maintenance until FAA prepares and submits a master plan for National Airport to the commission for approval," said the NCPC staff recommendation. "The proposal to enclose the existing observation deck for retail use clearly does not meet either of the two conditions established by the commission."

FAA spokesman David Hess said plans for the observation deck were "tentative" and only an effort by the airport to provide "the best level and best quality" of services to passengers.

He said, however, that the FAA has no plans to close National Airport, and that "as long as the airport is operating, it's necessary to provide services." The airport currently has three combination snack bar and cocktail lounges, one cafeteria, one restaurant, seven newsstands, a bookshop and a barbershop.

Hess said the long-awaited master plan for National, known as the Facilities Planning Guide, probably will not be released until late January. He would not say, however, whether the FAA plans to resubmit the observation deck proposal as part of the master plan for the airport.

Thomas Mills, a spokesman for the Arlington County Civic Association, said his organization opposed any expansion of facilities at the airport and that it was "premature and wasteful" for the FAA to consider additional shops before the master plan was completed.

"It seems absurd to build new retail shops when we don't know how long the airport will be open to commercial traffic," said Mills. "Our concern is that there is supposed to be a long-range plan developed for the airport, and we see FAA pushing this before that plan is out."

Transportation Secretary Elizabeth Hanford Dole appointed the 15-member Holton Commission to make a recommendation on setting up a regional airport authority to take control of National and Dulles airports. The commission recently became deadlocked over internal political struggles. Dole has now asked D.C. Mayor Marion Barry, Maryland Gov. Harry Hughes and Virginia Gov. Charles S. Robb to work out a compromise.