The world's largest toymaker announced a major new initiative yesterday aimed at making its plastic toys out of environmentally friendly, organically based materials derived from edible oils and plant starches.

Mattel Inc., the maker of Barbie, Power Wheels and Fisher-Price toys, said it hoped to begin making products from renewable materials as early as 2001, initially in toys aimed at children under 3 years old.

If substitutes are found, they could be used in all Mattel brands and product lines and replace polyvinyl chloride and a controversial group of chemical additives called phthalates that are used in soft plastic toys, the company said. Some phthalate compounds have been linked to cancer and kidney and liver damage in animals, and their threat to humans is being studied.

The announcement was immediately hailed as a "revolutionary step" by Greenpeace, the international environmental group, which has led an aggressive fight against toys made with phthalates. "With Mattel an industry leader, this is a sea change for the toy industry and perhaps for the use of plastics in general," said Rick Hind, legislative director for Greenpeace's campaign.

As for Barbie, Hind added, "she will become even healthier and a truly natural beauty."

Mattel's announcement came just as the European Union met to formally approve an emergency ban on phthalates in polyvinyl chloride (PVC) toys designed to be chewed by children under 3, such as baby rattles and teething toys. About eight European countries now have some sort of prohibition on the sale of PVC toys, but the EU ban, to be announced today, would be effective in 15 countries. EU also is considering ordering toymakers to place warning labels on other soft vinyl products, such as bath toys and squeeze toys that young children could place in their mouths.

Last year, the staff of the U.S. Consumer Product Safety Commission decided against recommending a ban on PVC toys made with phthalates, saying its studies showed that the amount of phthalates ingested by small children "does not even come close to a harmful level." The agency is conducting more studies, including observing 200 children to see what kinds of products they put in their mouths and for how long. It also expects to name a scientific panel next month to study whether the phthalate commonly used in toys is a cancer risk.

The American toy industry has repeatedly said there is no evidence to indicate a health risk from toys made with phthalates. Even so, most major companies last year said they would no longer use the additive for teething toys and rattles. Their decisions came after major retailers announced plans to remove phthalate teethers and rattles from their shelves, in response to Greenpeace's publicity campaign.

A new study by a coalition of consumer and environmental groups to be released today indicates that for the most part, phthalates are no longer found in teething toys and rattles sold by major retailers. But the study, by the National Environmental Trust, a nonprofit educational group, found that many teethers sold by local discount or "dollar" stores contained high levels of phthalates.

Additionally, the study found high level of phthalates in each of the 17 bath and squeeze toys purchased at major retailers. For the most part, these toys contained the chemical softener diisononykl phthalate (DINP), which has been linked in various animal studies to cancer and liver and kidney damage.

If the toy industry "can't or won't find a substitute for phthalates in their bath and squeeze toys, they should print on the label which toys contain the chemical and let parents decide whether they want to expose their child," said Jeff Wise, the trust's policy director.

But NET officials said they were particularly disturbed by one toy, Luv Pony by Tara Toy Corp., that contained a high level of diethylhexylphthalate (DEHP), which was voluntarily withdrawn from the toy market in the mid-1980s because it was found to be carcinogenic. DEHP was replaced by DINP.

Officials at Tara Toy declined to comment.

Mattel spokesman Glenn Bozarth said the company's position on phthalates "remains the same: The scientific evidence still strongly supports the safety of phthalates. But concerns have been expressed by retailers and environmental groups and we want to address those concerns."

Rich Molyneux, Mattel's senior vice president of quality and operations technology, said that since the early 1990s, the company has been looking at alternative materials to polyvinyl chloride, used in toys for more than 50 years. He said the company would move as quickly as technology permits to introduce the newly formulated toys--provided they are proven to be safer than the plastics now being used. "If we do things right, and use organically based materials that are also biodegradable, then we will move away from the landfill issue as well."

Molyneux declined to say exactly how much Mattel would spend on its effort, noting only that "it will take a significant amount of our resources to get this thing through in the year 2000. It will be expensive."

Mattel joins a handful of other firms that have announced plans to phase out or eliminate PVC from consumer products, including Lego Systems, Nike, General Motors Corp. and Ikea.

Wise, the environmental trust official, applauded the move as "a great step forward for the toy industry." But he added: "Since they say it will take some time to transition away from material containing phthalates, we'd really like to see them label toys for phthalates in the meantime. Parents have a right to know what they're buying."