Joseph (Joe) Kreuter, 19, a cancer victim who turned to volunteer work with the St. Francis Center's Healing Heart Program for children here after being barred from treatment at the National Institutes of Health for disciplinary reasons, died Wednesday at Arlington Hospital.

A lifelong area resident, Mr. Kreuter was born in Prince George's County. He attended local elementary and secondary schools and was active on his church baseball team before discovering four years ago that he suffered from sarcoma, cancer of the connective issue system, a rare form of the disease.

Doctors at NIH, where he was treated for three years, said his cancer was unresponsive to treatment and probably terminal before dismissing him last November for using marijuana, distributing illegal drugs to other cancer patients and attacking a doctor. He was barred from further treatment at NIH.

In an article published in The Washington Post last November, an NIH doctor who had treated Mr. Kreuter said his case had presented NIH with a "very profound moral dilemma." Other doctors there said he had become addicted to morphine and other narcotics prescribed as painkillers, that he had refused to give up drugs and that he had refused therapy.

Since his morphine dependence was considered controllable through the use of methadone, NIH's real problem was Mr. Kreuter's use of marijuana laced with PCP, which he allegedly passed out to other patients, according to the story in The Post. He was said to have experimented with marijuana, which has been used in state and federal government programs for cancer patients, before being hospitalized.

Although Mr. Kreuter claimed the marijuana allayed his nausea (which often is a side effect of cancer therapy), NIH is against the rules. He had been warned that this behavior would result in dismissal.

After Mr. Kreuter left NIH, doctors there arranged for him to be be treated at a Washington Hospital. He signed himself out three weeks later because, he said, they weren't helping him.

In addition, his parents, Arlington County Fire Department Capt. Walter D. and Eloise Kreuter, said he could not return home because of his rebelliousness.

Mr. Kreuter, who bore scars on his chest from more than six operations to remove tumors and a patch on his back the size of a dinner plate from skin grafts made necessary by burns from radiation treatment, spent much of 1980 alone, drifting, living on the streets and injecting himself with large does of a narotic painkiller so it would not be stolen. He was beaten and robbed.

He had $320 a month in disability checks and food stamps.

Last November, after reading the Post Article, Polly Whitehouse, cofounder of the Healing Heart Program, a network for children suffering from life-threatening diseases, contacted Mr. Kreuter and began working with him. He became involved in the formation of Healing Heart, which began earlier this year with headwuarters at the ST. francis Center. The program's other founder is the center's director, the Rev. William Wendt, a well-known Episcopal priest and activist.

Before his death, Mr. Kreuter had represented the Healing Heart at local high schools, where he shared his presonal experiences.

In the Post story, Mr. Kreuter, who had returned recently to his way: "I was only a kid and my life was so good when this happened. I played basketball and I thought of going to college and now I just hurt. I don't really want to stay in the hospital but I have nowhere else to go."

Besides his parents, survivors include four sisters, Gwenda Ayers of Woodbridge, Dixie Kreuter of Arlington, Cynthia Roger of Hutchinson, Kan., and Polly Kreuter of Jacksonville, Fla.; a brother, Charles, also of Hutchinson, and a grandmother, Sara Kreuter, of Suitland.

The family suggests that expressions of sympathy be in the form of contributions to the Healing Heart Program, St. Francis Center, Washington, 22206.