William T. Murphy, 78, a Democratic member of Congress form Illinois for 12 years, died of cancer Sunday in an Oak Park III. hospital.

Mr. Murphy represented the old 3rd District of Illinois from 1959 to 1971, which was composed largely of the far South Side of Chicago, site of the city's giant steel mills.

During the years he represented the district its neighborhoods underwent massive racial change. Blacks composed about 20 percent of the population in 1960 and 40 percent in 1970.

In 1966 the late Dr. Martin Luther King was hit by a stone while leading an "open-housing" march through the district.

Mr. Murphy favored open-housing legislation.He was long identified as a member of the late mayor Richard J. Daley's Chicago Democratic organization.

The Republicans attempted to capitalize on racial unrest in the District and ran close races against Mr. Murphy in both 1966 and 1968. Mr. Muphy also faced priamry opposition from a black newspaper publisher in 1968. In 1970 he announced that he was retiring from Congress.

While in the House he served on the old Foreign Affairs Committee, and for a time was chairman of the Subcommittee on Asian and Pacific Affairs.

Mr. Murphy was born in Chicago and earned a law degree at Loyola University there. He was a veteran of World War I and was a member of the Chicago City Council from 1935 to 1956.

He is survived by two sons, Dr. William T. Jr. and Dr. John P., both of Bethesda; A daugther, Rosemary Blyth, of La Grange, III.; a sister, Kathryn V. Hunt, of Chicago; and five grandchildren.