In a surprise move, House and Senate conferees last night agreed to a bill that not only funds the National Endowment for the Arts for fiscal 1991 but also extends the life of the agency for three years.

The appropriations bill is free of explicit restrictions on the type of art that may be funded, but it includes a grab bag of procedural reforms the impact of which has not yet been assessed by the agency. It also would require the NEA chairman to ensure that grants are made "taking into consideration general standards of decency and respect for the diverse beliefs and values of the American public."

While arts groups object to some of the procedural changes mandated by the bill, few had expected legislation to emerge without the explicit content restrictions imposed in the agency's fiscal 1990 funding bill, which forbids funding of works that "may be considered obscene, including but not limited to, depictions of sadomasochism, homoeroticism, the sexual exploitation of children, or individuals engaged in sex acts and which, when taken as a whole, do not have serious literary, artistic, political, or scientific value."

Elimination of that language appears likely to put an end to the controversial requirement that grant applicants sign a pledge that they will comply with any such restrictions. That requirement had prompted several artists and arts groups to reject NEA funding and challenge the constitutionality of the restriction language in court.

Senate Appropriations Committee Chairman Robert Byrd (D-W.Va.) said during the conference that he was unhappy with the lack of content restrictions. "I know there is great frustration on the part of many senators and many House members," he said.

But he added: "If I could devise language that would meet the constitutional requirements, I would do it. I can't do it."

"We're delighted to be reauthorized for three years," the endowment's congressional liaison, Rose DiNapoli, said. "We'll have to really look at the bill carefully before we can comment any further on what the implications will be."

The conference committee adopted a House compromise on the NEA hammered out by Rep. Pat Williams (D-Mont.) and Thomas Coleman (R-Mo.). Both houses are expected to vote tomorrow on final passage of the interior appropriations bill, which includes the NEA funding and reauthorization.

Rep. Sidney Yates (D-Ill.), chairman of the House Appropriations subcommittee on the interior, said he preferred the version sponsored by Sen. Orrin Hatch (R-Utah) and Claiborne Pell (D-R.I.). But with only one other House conferee supporting that approach, the committee last night agreed to accept the House version of the legislation.

While Yates said he regretted that the House version had prevailed, he noted that that measure reauthorizes the agency for three years, while the Senate legislation would have extended it for only one year. "I'm glad we've launched the NEA again," he said.

John Buchanan, chairman of the liberal lobbying group People for the American Way, said he had hoped the Senate version of the bill would pass. "We're troubled by the restructuring involved in the House version," he said. The so-called "decency" provision in the House version might raise constitutional questions, he added.

The bill, which allots $175 million to the agency in fiscal 1991, also would:

Empower the endowment to recoup funds from grant recipients who have used them to create works that were later found to be obscene in court.

The agency could bar such artists from further funding for three years unless the funds are promptly repaid.

Require grant recipients to report periodically on their progress.

Impose reforms to eliminate a perceived potential for conflict of interest on grant review panels and to ensure that panels are geographically diverse and include lay people.

Increase the percentage of NEA grant money allotted to state agencies from the current level of 20 percent to 27.5 percent over three years.

Give the endowment's advisory council a greater role in selecting grant recipients and take away the NEA chairman's authority to approve a grant that is not recommended by the council. The chairman will retain the authority to veto grants approved the council.

Expand arts education programs.