The memories of two modern wars dominated this year's National Book Awards, as honors were bestowed last night upon a novel about a Vietnam veteran's haunted dreams and a chronicle of the development of the atomic bomb.

The prize for the best fiction for 1987 went to Larry Heinemann for his second novel, "Paco's Story" (Farrar Straus & Giroux), which traces one soldier's experiences as the sole survivor of a massacre during the Vietnam War. The winner of the nonfiction award was Richard Rhodes for "The Making of the Atomic Bomb," published by Simon & Schuster this year to generally glowing reviews.

The selection of Heinemann's novel -- described as "agonizing" and "down to the wire" by the chair of the fiction jury, novelist Hilma Wolitzer -- was unexpected given the competition, which included Philip Roth's latest novel, "The Counterlife," and Toni Morrison's current best seller, "Beloved."

Heinemann himself, in his lengthy acceptance remarks, called his selection "remarkable" and "an interesting surprise." Wolitzer said she and her fellow fiction jurors, Los Angeles Times critic Richard Eder and novelist Gloria Naylor, had reached their verdict "by majority vote."

The awards to Heinemann and Rhodes -- checks for $10,000 and specially commissioned sculptures by Louise Nevelson -- were presented at the Pierre Hotel in New York. The black-tie dinner was attended by more than 400 writers, critics, editors, publishers and other members of the literary and publishing worlds.

The nonfiction judges -- Justin Kaplan, Frank Freidel, Diane Johnson, Robert Kotlowitz and Carol Rinzler -- cited the Rhodes book for being "comprehensive, heroically researched, and consistently challenging."

In his Washington Post review of "The Making of the Atomic Bomb" last February, historian Walter A. McDougall praised the book as "magnificent" political and scientific history. "It is also," he went on, "a sensitive personal account of the men who made the bomb possible and then made it happen, and of what they learned along the way about themselves, science and the nature of man."

Rhodes, a 50-year-old native and resident of Kansas City, Kan., described his motivation for writing his eighth book this way: "I couldn't believe we were hellbent on destroying ourselves."

The other nonfiction nominees were "Look Homeward: A Life of Thomas Wolfe" by David Herbert Donald (Little, Brown); "Chaos: Making a New Science" by James Gleick (Viking Penguin), "Mothers in the Fatherland" by Claudia Koonz (St. Martin's Press); and "New York 1930: Architecture and Urbanism Between the Two World Wars" by Robert A.M. Stern, Gregory Gilmartin and Thomas Mellins (Rizzoli).

Besides the winner and the Roth and Morrison novels, the fiction nominees included Howard Norman's "The Northern Lights" (Summit) and Alice McDermott's "That Night" (Farrar Straus & Giroux).

The first National Book Awards were presented in 1950. After several years of financial difficulties, proliferating book categories and even another name, in 1986 the awards were reorganized, winnowed to the present dual prizes for fiction and nonfiction and given back their historic name.

Last night's ceremonies were the highlight of National Book Week, a series of literary events that this year, for the first time, includes a Washington component: a reception this afternoon, hosted by the Center for the Book in the Library of Congress and featuring Otto Bettmann, founder of the Bettmann Archive and author of the newly published book "The Delights of Reading."