The D.C. government is preparing to launch a major effort to stimulate business expansion in Washington with tax exempt revenue bonds at the same time that the Reagan administration is seeking to severely restrict their use.

The city's Office of Business and Economic Development (OBED) has received 29 applications from private businesses and nonprofit groups for millions of dollars in low-interest revenue bond financing, with more such applications expected.

However, city officials acknowledge that they are under the gun to quickly process the most promising of the applications, in case Congress goes along with a U.S. Treasury official's request last week to curb use of tax exempt bonds for private purposes.

"It looks like just as we're trying to get in, they're closing the door," said Alphonse G. Hill, deputy mayor for finance. "Sure it bothers us."

Mayor Marion Barry's administration published interim rules June 10 on use of the bonds, pending enactment of permanent legislation by the City Council, which will have ultimate control.

Barry aides say they haven't decided whether to place a cap on the total amount of revenue bonds they intend to issue. However, the interim rules would limit the issuance of bonds for most individual projects to $10 million. The bonds could be used for a range of private and public projects, including new housing, plant expansions, retail development, sports and convention facilities, construction of pollution control devices and mass transportation.

The interim rules specifically prohibit using the bonds for sexually oriented businesses and also make it difficult to finance automobile firms, restaurants or establishments offering entertainment.

Yesterday, City Council member Charlene Drew Jarvis (D-Ward 4), chairman of the housing and community development committee, said she is drafting legislation spelling out procedures for issuing the bonds and giving her committee principal jurisdiction in reviewing the politically sensitive bond applications.

Ivanhoe Donaldson, deputy mayor for economic development, urged Jarvis' committee to support permanent legislation that would require applicants to initially go through the mayor's office in seeking approval of bond applications--as is now the case.

A high-level council staff member later raised the possibility of a struggle between the council and the mayor's office over the policy for handling revenue bond applications. "It's another way to leverage patronage," the aide said.

Tax exempt bonds have been used widely by local governments for years to help finance private development. Last year alone, about $44 billion worth of those bonds were issued. The bonds are attractive to private developers because of the low interest rates they carry and appeal to private investors because of tax breaks they afford.

The U.S. Treasury expects to lose an average of $13 billion in revenue in each of the next five years because of the bonds.

Kwasi Holman, acting director of the city's office of business and economic development, declined to release a complete listing of the businesses and firms that have applied for bonds.

Developer Jeffrey N. Cohen said yesterday he is considering seeking approval to use D.C. revenue bonds for a development near the D.C. municipal center.