Elmo R. Zumwalt, the controversial former chief of naval operations whose efforts to unseat U.S. Sen. Harry F. Byrd Jr. ended in defeat, announced yesterday he is leaving "public life at this time" to become president of a Milwaukee-based corporation.

His surprise announcement that he was leaving Virginia came just weeks after he had been privately hoisting trial balloons with Democrats around the state over whether he should seek the state's other Senate seat next year.

Associates of the retired admiral said Zumwalt, 56, found the offer to become president and chief executive officer of American Medical Buildings, Inc., too financially attractive to refuse.

His salary at American Medical, which builds and leases medical buildings, was not disclosed, but the company's chairman, Joseph W. Checota, said it was "not out of keeping with the terms of the other offers Zumwalt has received."

Zumwalt, who has lived in Fairfax County since he retired from Navy in 1974, made the decision to move to Milwaukee "within the past 10 days" after he returned from a State Department-sponsored trip to China, Checota said.

His announcement remained unknown to some of his Virginia political associates until late yesterday, shortly before Checota announced the appointment to a meeting of American Medical employees in Milwaukee. He said Zumwalt will assume his position with the firm Oct. 1.

The youngest man ever named to head the Navy, Zumwalt shocked and angered some of the service's traditionalists by firing off more than 100 reform directives that became known as "Z-grams."

The orders some of which have now been revered, liberalized Navy haircuts, eliminated so-called "Mickey Mouse" regulations, and were designed to improve the life of the average sailor.

In his first bid for public office, the California-born Zumwalt last year was repeatedly scored by Byrd supporters as a "carpetbagger" who knew little of Virginia's traditions or problems.

Although Zumwalt had the backing of the state's splintered Democratic Party, Byrd, who ran as an independent, easily defeated him.Byrd drew 57.2 per cent of the vote to Zumwalt's 38.3 per cent. Martin H. Perper, another independent in the race, drew 4.5 per cent of the vote.

Zumwalt said in a statement that his decision to join American Medical was, like his decision to run against Byrd, made by the members of his family. "We have come to the conclusion that I should leave public life at this time," he said.