IN SEPTEMBER 1976, the Chilean secret police assassinated a prominent Chilean exile and a young American woman in morning rush-hour traffic on Massachusetts Avenue in Washington. They believed they could come into the capital of the United States, blow apart a man under the protection of U.S. law, kill an American citizen, and get away with it. They were right.

The murder of Orlando Letelier, former Chilean ambassador to the United States, and Ronni Karpen Moffitt, Letelier's colleague at the Institute for Policy Studies, touched off a surreal manhunt in which FBI agents pursued terrorists once trained by the CIA through a nether world of twisted allegiances created by U.S. cold war policies. It led to the trial and conviction of four terrorists -- an expatriate American and three anti-Castro Cubans -- and indictments of three high officials in the regime of Chilean dictator Augusto Pinochet. And it culminated in the collapse of efforts to extradite the three Chileans when Pinochet called a bluff and the U.S. meekly tossed in its cards, face down.

The Letelier-Moffitt case contained every requisite ingredient for an international spy thriller -- intrique, betrayal, secret meetings, double and triple agents, beautiful spies, the technology of violence, and the fate of governments hanging in the balance. John Dinges and Saul Landau, two writers intimately involved in the case, tell its tangled story in a book that reads like Frederick Forsyth's The Day of the Jackal as the cold-blooded assassin stalks his unsuspecting target. Occasionally, they veer too far towards a fictional narrator's omniscience when they describe thought processes they can only have surmised. But on the details of the case, they are careful and precise. Dinges was in Chili at the time of the assassination, a correspondent for American news organizations. His dispatch for The Washington Post first connected a suspect sought by U.S. authorities to DINA, the Chilean secret police. Landau, a prize-winning filmmaker, was a colleague of Letelier's who spearheaded a private investigation into the murder.

They open their story with the tense arrival of a mysterious assassin at Kennedy International Airport. Within hours, he is putting together his murder team of rightwing Cuban exiles. Meanwhile, on a quiet street in suburban Maryland, Letelier, the target, is leaving for his office, patting the shaggy head of his English sheepdog as he goes out the door. We go back six years, to another September, when Salvador Allende, a socialist, won the presidency of Chile in a close election. The U.S. had been intervening in Chile's politics for years to prevent just that. Allende's victory in 1970 touched off a frantic effort to block his inauguration ordered by President Nixon himself. When that failed, the Nixon administration waged a secret war to frustrate. Allende at every turn and helped prepare the atmosphere for Pinochet's bloody military coup in September 1973.

Letelier, Allende's ambassador to Washington, had returned to Chile in 1973 to join the cabinet. He was arrested the day of the coup and spent most of the following year in a concentration camp near the antarctic. When international pressure gained his release, he returned to Washington to mobilize opinion against Pinochet.

It was a difficult job. Henry Kissinger's State Department supported Pinochet unreservedly. Both by word and action, Kissinger informed the Chilean dictatorship it was on the right track. Letelier, an urbane, attractive man well-versed in Washington's ways, began to argue the case against Pinochet. He spoke about the torture and repression, wrote articles, talked with anyone who would listen.

Such activities were dangerous. An exiled Chilean general loyal to the constitution had been assassinated in Buenos Aires in September 1974. The next year, a prominent Chilean Christian Democrat was gunned down in Rome. Now September, a somber month in recent Chilean history, had come round again: month of the coup, month of police sweeps in Santiago, month of attacks on exiled leaders. "September weighs on us," Letelier's widow would write in a poem on the first anniversary of his murder, "the month of your gravestone."

Drawing on their own sources, as well as on information revealed in the government investigation, Dinges and Landau reconstruct the plot against Letelier. They show how DINA built up its capability to strike abroad, and in one of the most fascinating parts of their narrative, they trace the odyssey of Michael Townley, a bound, blue-eyed expatriate American born in Iowa, raised in Chile, who became DINA's chosen instrument for assassination. Townley was an outsider who needed acceptance and approval, who wanted more than anything else to fit in. He studied novels -- including The Day of the Jackal -- to learn the craft of a spy. He wanted to be a soldier in the war on the Left, to take orders, give loyalty. In DINA, the shadowy terror apparatus answering directly to Pinochet, he finally found a home. His DINA masters saw the usefulness of Townley's U.S. passport, his command of English, his self-taught skill with cars, electronics, and plastique, and his contacts in the rabidly anti-Castro Cuban organizations gained during brief periods spent in Miami.

Equally compelling is the reconstruction of the investigation that followed the murderous explosion of Townley's bomb under Letelier's car. Dinges and Landau follow the investiigation through its twists and turns, false starts and sudden breaks, an investigation reminiscent of the fictional French hunt of the Jackal in the careful combing of immigration records, the frustrating trail of false passports, the pursuit of a faceless assassin with too many aliases. What is different, of course, is the outcome. In Forsyth's novel, starting from the thinnest shreds of evidence, the French succeeded in blocking the Jackal.

With a great deal more evidence that a DINA operation was afoot, high U.S. officials, including then CIA director George Bush, apparently betrayed no curiosity. And after the crime, the investigation was repeatedly hampered by as-yet-unexplained actions of other U.S. officials. Dinges and Landau cite a key State Department officer in possession of information that might have shortened the investigation by a year. Instead of giving it to the FBI, he simply covered his bureaucratic flanks with a memo for the files. Other officials leaked information in an attempt to discredit Letelier. Most disturbing of all is the disclosure that consular and immigration files vital to the case were removed or destroyed.

There is much for Americans to ponder in this book. Letelier's assassination was not a case for foreigners inexplicably settling their impenetrable disputes on American soil. Without exception, the principals in this case had strong ties to this country. Which of them understood the United States better? Letelier, who lived here 15 years, who raised his sons in Bethesda, Maryland, who told worried friends DINA would not dare touch him here? Or his accused murderers: Colonel Manuel Contreras, head of DINA and closest confidant of Pinochet, who spent two years at Fort Belvoir, Virginia, joined the Lions Club, and now walks free in Chile despite a U.S. murder indictment against him? That anti-Castro Cubans with their long-time ties to the CIA? Townley, American-born hit man for a foreign dictator? Somehow, in all their experience in the United States, in all their conversations with U.S. officials, they never got the impression that murder on the streets of Washington was beyond the pale.

Americans reading this book may feel justifiable pride in the aggressive young prosecutor and the tough FBI agents who broke the case. But they may well wonder why the resolve of higher officials crumbled in the final showdown with Pinochet, why the final response of the Carter administration to a terrorist act by a foreign government was a set of sanctions so hollow that a Christian Democratic leader within Chile (quoted in The Washington Post) concluded: "We didn't think the United States would accept the assassination of a former foreign minister on its soil. But obviously it has." Translation of poem on page one: For the executioner who ordered this death, I ask punishment For the traitor who survived the crime, I ask punishment For him who ordered the agony, I ask punishment For those who defended the crime, I ask punishment -- Pablo Neruda (from "The Enemies")