The D.C. Lottery Board announced yesterday that the District of Columbia would begin selling lottery tickets the week of Aug. 23, with prizes ranging up to $1 million cash.

The tickets will be sold at hundreds of locations throughout the city at sites ranging from supermarkets to liquor stores to newsstands to service stations. Only the downtown federal enclave and the Georgetown historic district will not have vending places. The board decided on the week of Aug. 23 during a meeting yesterday, and said the precise day of the first sales would be announced later.

The board said yesterday that it had selected an initial 354 vending places from among 364 applications, according to Douglass Gordon, executive director of the lottery board. He said the board plans to select several hundred more ticket outlets before the "instant" lottery games start next month.

The instant lottery will be the first game of chance offered in Washington under a gambling initiative approved by voters by a nearly 2-to-1 margin in November 1980.

Lottery officials said customers may purchase any number of tickets at a cost of $1 each. The contestant can determine whether he has a cash winner by rubbing a covering layer off the ticket to disclose a series of symbols. If the symbols appear in the proper sequence, the ticket is a winner. Prizes will range from $2 to $1 million.

Winners of $50 or less can collect their prizes directly from the selling agent and can redeem a winning ticket for up to one year after purchase.

Those who have won more than $50 must claim their prizes at a central location -- to be determined before lottery sales begin -- where payment will be made by check.

The games are expected to generate about $10 million in ticket sale revenues over the first eight to 10 weeks, according to lottery officials. Of that amount, about half will be returned to players in the form of prizes, 30 percent will go into the city's treasury and the remainder will pay for operating costs.

Details were released yesterday after a three-hour closed meeting between the board and representatives of the joint venture team of Scientific Games Development Corp. of Atlanta and Games Production Inc. of Washington, the firms chosen by the board to operate the city's lottery games.

The beginning of the games had been in doubt after two losing bidders for the instant lottery franchise filed formal protests with the board and the U.S. General Accounting Office, alleging that the board selected the winning lottery firm improperly and asking that the award be set aside.

However, spokesmen for the two firms -- Raven Systems and Research Inc. of Washington and Glendininng Companies Inc. of Westport, Conn. -- said they had told the board that they no longer will contest the contract award.

Spokesmen for both firms declined to discuss the reasons for dropping the protests.