James R. Taylor, the police chief nominee in Prince George's County, was the subject of a hiring discrimination suit in largely black Newburgh, N.Y., where he once served as police commissioner, and was sharply criticized by that city's black leaders.

When he left the force there was only one black officer in the department, the same number as when he arrived.

When Prince George's County Executive Lawrence Hogan nominated the 47-year-old Taylor to head the county force earlier this week, he said a key factor in his choice was his belief that Taylor would improve the force's image in the black community.

But black groups in Newburgh, where Taylor was police commissioner in 1974-75 and city manager from 1975 until last year, criticized Hogan's candidate as insensitive to the concerns of the black community in that largely black city.

"It is very doubtful that he made any kind of contribution in the area of human relations while he was here," said Herbert D. Horton, chairman of the Orange County, N.Y., Human Relations Commission. "Racial problems didn't get any better. They may have gotten worse."

The head of the Newburgh NAACP, Harvey J. Burger, also said that Taylor was insensitive to blacks and failed to take proper action against police officers named in brutality complaints.

The Prince George's County chapter of the civil rights organization said it is looking into "rather disturbing information about Mr. Taylor's dealings with the black community in the past." It said it would decide next week whether to endorse Hogan's nominee.

Taylor said the charges of insensitivity were totally untrue and that during his tenure he had done much to overcome bad feelings that existed when he arrived in Newburgh.

He said the department had been wracked by corruption and that more than a dozen officers and a former chief had been indicted when he was brought in as commissioner.

He conceded he circumvented his own approval process for new officers in order to bring new recruits onto the force but denied it had anything to do with their race.

The controversy involved a neighborhood police program Taylor established to improve the department's image in the black community in the wake of the police scandal.

Taylor obtained a federal grant of several hundred thousand dollars to hire more than a dozen police officers to work in the black community. He said civil service rules required him to hire the 14 candidates who scored highest on a civil service exam.Thirteen of the candidates were white.

A legal services lawyer in Newburgh, Harold Witte said he met with Taylor in an attempt to convince him to establish an affirmative action program and to increase minority hiring. Witte said he left the meeting believing Taylor would make efforts in that direction.

Witte and another lawyer were representing Julius Beckwith, one of the black recruits who had not been hired and planned to file suit charging the department with discriminatory hiring practices.

Taylor acknowledged yesterday that he sped up the hiring of the new recruits, 13 whites and one hispanic, because he was concerned he would lose the U.S. grant if the department became involved in expensive litigation.

Witte said the commissioner by-passed a biracial civilian screening panel Taylor himself had set up to review new recruits. Taylor said he could not recall that but thought at least some of the officers were screened later by the panel.

"I couldn't wait around," he said yesterday when asked about the case. "I had to get them hired, trained and to get the program going. We were short of personnel."

The case eventually was heard by District Court Judge Whittman Knapp but was settled when the department agreed to a minority hiring procedure.

However, the present commissioner, Thomas J. Wolrab, said that when Taylor left the Newburgh department in 1978, the department still had only one black.

Taylor has been both praised and criticized by community leaders in Petersburg, Va., where he has been police chief in recent months. His problems there were mainly with the black mayor who tried to have him ousted from his job after Taylor administered lie detector tests to new recruits. The mayor called his action racist.

Support from black groups in Prince George's County is important for Taylor because his nomination may encounter opposition on the County Council, which must approve his nomination.

Council members have said they have been told of several police brutality reports filed against the Newburgh Police Department during Taylor's tenure. There is no indication, however, that any of the charges directly involved Taylor.

Another obstacle Taylor faces is a recently issued report from the New York Department of Audit and Control, which criticized Newburgh's fiscal management during the time Taylor was city manager. The report said budgets were incorrectly or unrealistically prepared and showed deficits of more than $600,000 when Taylor left.

The present mayor of Newburgh, George Shaw, said yesterday, however, that Taylor was not responsible for the activities criticized by the auditors. t