Clarence Daniel Leatherman, 68, who retired in 1974 from the Defense Language Institute, died Friday at Walter Reed Army Hospital. He had cancer and a heart ailment.

Dr. Leatherman had served in Washington and Europe during World War II as a colonel in the U.S. Army infantry. His active military duty ended in 1947, when he became a civilian employe of the Department of the Army.

He was an educational adviser, working in the personnel and operations units of the department. He was assigned, to the Guided Missiles School in Huntsville, Ala., in the early 1960s. He transferred to the Defense Language Institute in the early 1970s.

At various points in his career, Dr. Leatherman had taught psychology at George Washington University, Drexel Institute and the University of Alabama.

He was born in New Castle, Pa. He graduated from Gettysburg College and earned a doctorate from Johns Hopkins University.

He was the author of several military personnel management texts.

He is survived by his wife, the former Olivia Watkins, of the home in Falls Church; a daughter, Jane Carol Sieck, of Falls Church, and two grandchildren.

The family suggests that expressions of sympathy be in the form of contributions to the American Heart Association.