In a move with strong political overtones, Acting Gov. Blair Lee III said yesterday he will ask the General Assembly to shift the hotly contested site of a medium security prison from an old can company in Baltimore to an isolated city park.

The decision could help defuse one of the most politically volatile issues of Lee's administration, although several lawmakers predict the proposal will spur an equally bitter fight over the recommended site located nearby the Anne Arundel County border.

"We'll have to fight it out," warned Sen. Jerome F. Connell Sr., an Anne Arundel County political leader. "My district isn't any worse than East Baltimore (site of the can company). My people are turning out en masse to protest a prison."

Lee said at his weekly news conference that he decided to ask for a shift from the old Continental Can building to the Fort Armistead park in South Baltimore after state prison officials concluded that the park would be "an acceptable alternative."

"The fact is that Continental Can is within two blocks of residential communities which are remarkable stable," Lee said. "As possible sites go . . . it's pretty good but not perfect. Fort Armistead is better in terms of not infringing on a residential community."

In January Lee began reappraising the state's year-old plans to build an 890-bed prison on the Continental Can site after encountering months of strong opposition from residents and political leaders of East Baltimore and other parts of the city.

He was accused by local representatives of insensitivity to lower-middle-class residents and complicity in a deal to buy the site from a developer with ties to now-suspended Gov. Marvin Mandel.

The issue has cost him voter and political support in East Baltimore and surrounding communities and was seen as a growing political liability in this election year. Several of Lee's gubernatorial opponents have blamed him for poor judgement.

By asking the legislature to switch sites for the prison, Lee appeased several powerful political leaders from East Baltimore while risking a rupture with equally potent lawmakers from South Baltimore and Anne Arundel County districts.

"It would be impossible for us to carry him if the prison was still a problem," said Sen. Robert L. Douglass, leader of a black East Baltimore organization. "With Continental Can out of the way, it makes it possible for us to consider him."

"This has got to help Blair (in the election)," said Sen. Joseph S. Bonvegna, an East Baltimore political power. "It will take the people off his back and show them he was sincere in his effort to change plans for the prison."

Del. Paul E. Weisengoff, an influential political figure from South Baltimore and head of the city's House of Delegates delegation, said he will oppose Lee's move to change prison sites to the old Revolutionary War fort site.

"He's trying to lose an election," said Weisengoff. "Teddy (Baltimore County Executive Ted Venetoulis, a gubernatorial candidate) is really starting to look good to me now. I think Blair's going to have a lot of trouble on this."

"He certainly can't expect me to campaign for him if he tries to locate something in my district the people are against," Sen. Connell said of Lee. "If he goes ahead with this, it means he'll lose the northern part of Anne Arundel."

Lee said he does not consider opposition to the park site insurmountable. He said community resistance seemed "far fetched" because the closest residential area is almost two miles from Fort Armistead and would not be affected by a prison.

If the legislature approves his plan, Lee said, he would offer to buy the park site from Baltimore or swap the 25-acre Continental Can location for it. The East Baltimore site is considered ripe for industrial development.

The state already has paid $4.2 million for purchase of Continental Can and preparation for a prison. Lee said he does not consider the expenditures wasteful because some of them enhanced the value of the land.