Washington lawyers are collecting nearly $1 billion this year in legal fees, far more than doctors and dentists, the usual top earners in most local economies, and far more than any other professional group in the District of Columbia, according to the U.S. Department of Commerce.

Although Washington, with 21,000 lawyers, has only about 1 percent of the law firms in the country, D.C. lawyers get nearly 4 percent of the annual income earned by lawyers nationwide. Last year, the national total was $23 billion, according to the Commerce Department, pushing the D.C. total toward $1 billion.

The legal business, in short, is also big business. Covington & Burling, the city's largest firm with about 200 lawyers, generated about $40 million in gross receipts last year, according to knowledgeable sources outside the firm. Meanwhile, two other prestigious firms, Arnold & Porter and Hogan & Hartson, reportedly earned more than $25 million last year.

Despite the Reagan administration's emphasis on deregulation of American industry, the number of lawyers, which grew by 50 percent in the last four years, is expected to continue to increase.

There now are more lawyers per capita in the Washington area than in any other large metropolitan area, and more lawyers here than in 42 other states, including sizable ones like Michigan, New Jersey and Massachusetts.

For the most part, these lawyers represent corporate America's interests before Congress and regulatory agencies. The expanding number of lawyers has also filled numerous downtown Washington offices, and in the process fueled the ever-increasing rents for office space in prime locations. As a result, some Washington business and research officials view the lawyers' presence as a mixed blessing for the community.

"As a businessman, they are a dramatic asset to the city," said Luther Hodges Jr., chairman of the National Bank of Washington and head of Mayor Marion Barry's downtown committee to guide development.

They also add to the stability of the Washington business community, said John Tydings, executive vice president of the Greater Washington Board of Trade, since legal business is relatively unaffected by mionor swings in business cycles.

But the legal boom has some negative aspects, several observers said. Law firm expansion is stimulating to the economy and brings in brainpower, says Atlee Shidler, executive vice president of the Greater Washington Research Center, "but it doesn't directly help the economy in terms of employing the unskilled worker.

"One of the worries aout downtown office space is that the retail industry is squeezed," Shidler said.

That view is seconded by Fred Ball of the Washington Board of Realtors. "It has been an axiom in the ral estate business that the prime office space went to attorneys, accountants and associations," Ball said. But the associations, which live on dues and contributions, and the smaller accounting firms cannot afford the high office rentals fueled by the legal boom, he said.

Ball said that prime office space in downtown Washington rented for between $10 to $12 a square foot per year just five years ago. Since then the rates have more than doubled, to up to $26 per square foot for "top of the line" space, he said.

The boom in the number of Washington lawyers has been fueled by a rapid expansion of the number of out-of-town firms opening branches here. Three years ago, according to a study by the National Law Journal, 33 of the country's top 50 firms had branches here. This year, 47 of the top 50 have offices here.

They are coming, says George Riley, head of a Ralph Nader-sponsored group which recently conducted a conference on legal fees, in part because of a "mystique" among law firms and their clients that "you need a Washington lawyer for access to regulatory agencies and for lobbying. The lawyers in D.C. are the former congressmen and regulators."

They are also coming to take advantage of the growth of Washington as an internationa banking center, Tydings said. International trade, location here of such international banking institutions as the World Bank, and foreign governments' needs for legal representation will continue to boost the demand for Washington lawyers, he said.

"The city is changing minute by minute," says relative newcomer Irving Younger, a partner in the Williams & Connolly law firm. "This city is well on its way to becomoing the second most important financial center in the country after New York."

The fees charged by the major Washington law firms are growing almost as fast the number of the lawyers. Senior partners at some of the larger firms now often charge as much as $200 an hour, some charge $250 an hour and a few superstars like Edward Bennett Williams or Clark Clifford, who can command fees of $350, often don't even charge by the hour. They charge a flat fee depending on the case.

High legal fees are troubling numerous corporations, many lawyers say, but most corporations seem to be shrugging off the rates as merely the cost of getting top legal talent.

Corporate executives "bitch a lot about the fees charged," said William Langston, corporate counsel for the Homestake Mining Co. in San Francisco. "But who's to say what lawyers are worth? It's a soft-service industry. What's a reporter worth, or a rabbi?"

Lawyers contend that their costs are rising rapidly and that they, too, are being squeezed. Starting salaries for first-year lawyers fresh out of law school are now almost $40,000 in larger D.C. area firms. Law firms are finding that costs for office space and new computerized billing and information systems are forcing them to sharply escalate the fees they charge.

A recent survey of major corporations showed that many companies are increasing the sizes of their in-house legal staffs, trying to avoid contracting out so much of their legal work. About 70 corporations sent representatives to the Ralph Nader-sponsored conference here last May to discuss ways of trimming legal bills through closer monitoring of costs and using smaller, less expensive firms.

But the large law firms are as yet unworried. Major corporations, who often stand to win or lose millions of dollars on a given case or regulation, still seem to be willing to pay for the best, and still seem to feel the best is the most expensive.