Ralph L. Stanley, the Reagan administration's mass transit chief, urged Washington-area officials yesterday to provide more local funds to expand the Metro subway system.

"Instead of asking the federal government for more funds," Stanley said in a statement submitted to a Senate subcommittee, Metro officials "should look inward to come up with a greater local share."

The federal government currently pays about 80 percent of Metro's construction costs. County, city and state governments provide the other 20 percent. Stanley and other federal officials have repeatedly pressed Washington-area governments to underwrite a larger share.

Stanley's remarks followed the Reagan administration's agreement earlier this week to begin negotiations over a contract to finance a proposed expansion of the subway system to 89.5 miles. The administration previously had limited Metro spending to 76.4 miles.

The 89.5-mile plan, drawn up last year by Washington-area officials, includes a Green Line extension from the Fort Totten station in Northeast Washington to a Greenbelt terminus in Prince George's County. It also provides for a Yellow Line spur to a Van Dorn Street station in Alexandria's West End.

During protracted negotiations over the 89.5-mile proposal, members of Metro's board of directors previously rejected any increase in local payments for Metro. But officials said yesterday the board is expected to reopen the issue at Stanley's urging.

Metro's long-range plans call for 103 miles. But officials say that no more than 89.5 miles can be financed with funds currently authorized by Congress. Stanley argued that an increase in local outlays might allow Metro to expand the system beyond 89.5 miles without additional congressional aid.

During yesterday's hearing, Sen. Mark Andrews (R-N.D.), chairman of the Appropriations subcommittee on transportation, raised what is expected to be a key issue for Metro. Citing a Senate Budget Committee proposal to cut mass transit spending by 25 percent, Andrews urged Metro to weigh the possible impact of a similar cut in its funds.

Although Metro officials said they were not prepared to comment on the issue, any sizable cut is considered likely to jeopardize the 89.5-mile plan. The proposal hinges on federal allotments of $250 million a year for the next four years, an amount previously endorsed by the administration. Any congressional cutback is expected to lead to reconsideration of the plan.

In his testimony, Stanley, who heads the Urban Mass Transportation Administration, criticized Metro's recent move to shift the Green Line terminus in Prince George's County from Rosecroft Raceway to Branch Avenue. Stanley contended the move had increased costs by $132 million without federal or congressional consultation.