Sen. Charles H. Percy (R-Ill.) disclosed at a meeting of the Senate Foreign Relations Committee, which he heads, that a new set of negotiations have begun that could decide the controversial issue, with the State Department on one side and the city on the other. Mayor Marion Barry and his ally, Sen. Charles McC. Mathias Jr. (R-Md.), a committee member, attended a meeting Monday in Percy's office, Percy said.

"We are trying to work out some compromise," Percy told the audience at yesterday's committee meeting, which was scheduled to act on the chancery bill. "We are not quite there yet," he added. He suggested another week may be needed.

The city now has the basic power, shared in a limited way with the federal National Capital Planning Commission, to regulate the location of chanceries, as embassy offices are known. The State Department, contending the city's procedures create too many obstacles and delays, wants to shift full authority to the planning commission -- which has said it doesn't want the job.

The House, after its own fruitless effort to reach a compromise, voted two weeks ago to go along with the State Department.

Two years ago, Congress invoked its veto power over D.C. legislation for the first time when it rejected a City Council measure that would have tightened restrictions over chanceries even further.