A California biotechnology firm announced yesterday that it has developed the first diagnostic test that can detect the AIDS virus, a development that could dramatically improve the speed and accuracy of AIDS diagnoses.

Cetus Corp. said its method provides a significant alternative to current tests, which do not actually identify the AIDS virus, but instead spot the antibodies produced by the body's immune system in order to fight the virus.

Present tests are also time-consuming and can produce misleading or false results. The tests sometimes indicate the presence of antibodies in people who don't actually have the AIDS virus, or fail to detect the virus in AIDS carriers whose immune systems don't produce detectable antibodies.

In contrast, the Cetus test would be faster and "virus specific," said Dr. Bernard J. Poiesz, an associate professor of medicine at the Upstate Medical Center of the State University of New York in Syracuse, who worked with Cetus. He said the test would be better because the Cetus method -- using what is know as "gene-probe" technology -- detects the genetic material that makes up the AIDS virus.

The Cetus gene probe is genetically engineered to only bind with the segment of DNA (deoxyribonucleic acid) that is unique to the AIDS virus.

"This is absolutely specific," asserted Jeffrey S. Price, Cetus's vice president of research and development. "It can't make a mistake."

"There's a lot of interest in a test like this because of the direct identification of the virus," said Peter Drake, who follows the diagnostics industry for Kidder, Peabody & Co. Inc.

Gene-probe technology is what Cetus hopes will be its edge in what has become one of the fastest-growing segments of the $4 billion diagnostics marketplace. Since the Food and Drug Administration approved the first commercial blood tests to screen for AIDS in March 1985, AIDS testing has become a $75 million a year business in the U.S. alone, and more than $150 million worldwide.

Currently, the ELISA test is most commonly used to screen blood for AIDS antibodies. Though relatively effective, the test can generate false-positive results that require another ELISA test. If the blood is still found to be tainted, the more sophisticated, time-consuming and expensive "Western Blot" blood test is used to confirm the presence of AIDS antibodies.

Because of its specificity, a gene-probe-based test should be a one-step, highly reliable and relatively inexpensive procedure for blood banks, according to scientists.

The nation's 2,300 blood banks use the tests to screen blood for the 3 million people who receive transfusions each year because AIDS can be transmitted in that way; the banks destroy blood found to contain AIDS antibodies.

Broader public concerns about the fatal disease have also spurred demand for AIDS testing.

"There are roughly 35 million tests a year," said Alan Fishman, a senior vice president with Electronucleonics Inc., a major supplier of AIDS diagnostic materials. "But there's planned testing by the Armed Forces; insurance companies are considering testing applicants; there's discussion of marital tests and testing of immigrants into this country. Hospitals are discussing tests during admission. The number is sure to grow dramatically."

Several states -- most notably California -- are exploring whether to start AIDS testing programs as part of their public health programs.

The new test, which must be approved by the FDA before it is released, could be on the market within a year, according to the company.

Other biotechnology companies are also using genetic engineering methods to try to develop a more accurate AIDS test.

Cetus, of Emeryville, Calif., will develop the test in collaboration with Eastman Kodak Co., which has a health-sciences division.