SHERWOOD ANDERSON By Kim Townsend Houghton Mifflin. 370 pp. $22.95

IN HIS DAY Sherwood Anderson was a figure to be reckoned with in American letters, but his day is long since past. To most readers his name conjures up little except confusion -- Maxwell Anderson? Robert E. Sherwood? -- and his work is little-read outside the classroom. Even there, about all of it that's taught is the one book that remains, indisputably, a classic: Winesburg, Ohio, the collection of interrelated short stories about life in small-town America. As for the rest of his work -- Windy McPherson's Son; Tar: A Midwest Childhood; Poor White; Dark Laughter -- it is now all but unknown, save to the occasional graduate student burrowing into the hidden corners of the national literature.

It is if anything a measure of how far Anderson's star has fallen that Kim Townsend's fine account of his life is the first in three and a half decades -- a period in which, by contrast, there have been dozens of biographies of Scott Fitzgerald, Ernest Hemingway, Willa Cather, William Faulkner and others with whom Anderson was once routinely compared. This is not precisely a literary injustice, inasmuch as there's nothing quite like a rereading of Anderson's work to remind oneself how thin most of it is, but it does rather throw matters out of perspective, since his influence on American writing was considerable. So it is good to have Townsend's book, and good that he has done the job so well.

Townsend is a scholar -- he teaches English at Amherst College -- but he has declined to honor the conventions of contemporary academic biography. There are no laundry lists in his Sherwood Anderson, no dogged compilations of the insubstantial, no interminable recitations of meaningless events and excursions. Instead he provides a brisk, sympathetic narrative of the life, adorned with only such psychological speculation as the evidence warrants, and intertwines it with a careful, unsentimental reading of the work. The result is a wholly persuasive portrait of a decent but troubled man who seems to have found true release and self-awareness only when, relatively late in life, he discovered his vocation as a writer.

He started out, late in the 19th century, as an advertising man, and he was very good at it. In Chicago, Cleveland and Elyria, this last a small city in his native Ohio, he pursued the American dream of material success and came close to realizing it, but in the end the pursuit broke him. In 1912, when he was 36 years old, he suffered what Townsend calls a "fugue state," or "state of flight," that compelled him briefly to desert his family and that launched him, however unsteadily, on the path toward the "curative" satisfactions of writing.

The word is Anderson's. Long before his work was good enough to be published, he had found that when he wrote he could escape the lies and evasions of ordinary life, and get closer to what he thought to be his real self. So he went back to Chicago, took an advertising job that supported him but demanded little of his creative energies, and applied himself to the task of self-discovery. It took about three years and was completed in the fall of 1915 when he wrote, to his complete satisfaction, a story called "Hands," which eventually became one of the two dozen assembled in Winesburg, Ohio. Then his new life began:

"At 39 Sherwood Anderson was still young, practically newborn if we apply the rule he was happy to borrow from Joseph Conrad, 'who said that the writer only lived after he began writing.' The only truth he clung to was that he was a writer, and that freed him further, for it meant that he could take any form . . . . He was the man who might have been 'grotesque' at almost forty but for the fact that he had listened to his own advice and stayed young. He was the man who at midlife found himself just born, come of age, because he was writing well."

OVER AND AGAIN in his early stories he made "an attempt to hear and render the voices of 'common people,' people who were not usually welcomed into the community of literary figures, people who often had no community themselves." American literature was still coming into its own in those days, still searching for a voice and an identity; to a steadily growing body of readers Anderson's stories seemed authentically and distinctly American, coming as they did from the Middle West and speaking as they did about the lives of "ordinary" Americans.

Though his writing never made him wealthy -- like most writers of fiction, he spent his entire career worrying over where the next dollar would come from -- it did bring him, for a time, a high literary reputation; in a country that had yet to produce many writers of more than provincial interest, he seemed the real thing. He was given awards, his books were reviewed favorably, he was courted and lionized by younger writers. Ernest Hemingway admired him -- for a time, and in his fashion -- and it was Anderson who urged the young William Faulkner to stop writing about bohemia and turn his attention to "that little patch up there in Mississippi." These and other young writers were influenced not by his style but by his example: "He represented professional success, he could say how you achieved it, he could say what you did to maintain it."

As so often happens in American literary lives, Anderson came to celebrity after his best work had been done. He wrote precious little fiction of consequence in the last 15 years of his life, but turned to newspapering -- he bought and edited a couple of small papers in Virginia -- and to pamphleteering on behalf of laborers and the deprived. His politics was of the left, but he resisted the temptations that lured so many other writers and intellectuals to communism during the 1930s. He died in 1941, at the age of 64, en route to a good-will tour of Latin America.

He was a complex fellow, haunted by sexual yearnings and confusions -- he married four times, and sexuality was a persistent theme in his stories -- and by what he saw as the conflict between man's humane instincts and his thirst for wealth and success. These inner uncertainties were the raw material out of which he fashioned his writing. Like that of Theodore Dreiser, whom he much admired, his work tends to be artless and, in Anderson's case, naive, but the best of it has dignity and stature. Winesburg, Ohio, is no mere period piece but a book that helped redirect the course of American literature; if Kim Townsend's biography leads to a revival of interest in it, and its author, that will be all to the good. ::