A federal appeals court panel overturned yesterday a 1980 jury verdict awarding $600,000 in damages to 375 inmates in maximum security at Lorton Reformatory who had sued the city over conditions there.

In an opinion by Judge Harry T. Edwards, the three-judge panel ruled that U.S. District Judge June L. Green erred in limiting city attorneys in their discussion of aspects of the case with corrections department officials, and in some of her instructions to the jury, which found the city liable for the damages.

The inmates contended in their suit that security conditions in the maximum security facility violated their constitutional rights against cruel and unusual punishment. The prisoners asked that those conditions be corrected and that damages be awarded.

In June 1980, the jury awarded each inmate $1 per day plus interest for every day they had spent in the maximum-security area from 1976 to 1980. After that decision, which the city appealed, Green ordered the city to take a variety of security measures pending the outcome of the appeal.

While the appeals panel also overturned the judge's order to improve conditions in the maximum-security unit, much of that work has been done, Peter J. Nickles, an attorney for the inmates, said in an interview after the ruling. Those changes include the hiring of at least 30 additional guards in maximum security, and installing metal detectors, an intercom system and surveillance cameras in the cellblocks, Nickles said.

Nickles said no decision had been made on whether to ask for a new trial.

In the opinion, Edwards said that Green, fearing that some inmates might face retribution if word got out in the prison "grapevine" that they had discussed assaults in the institution with city attorneys or prison officials, issued an order that barred city attorneys from discussing certain aspects of the case with prison officials.

That order, Edwards said, was "an abuse of discretion." Edwards also said that Green failed to tell the jury that the city could not be held liable for individual acts by prison officials that were not in keeping with city policy, and that the jury could award only nominal damages to the inmates for violation of constitutional rights unless actual injury to them was proven.