Residents of the tree-dappled Woodley Park neighborhood in Northwest Washington lost their decade-long battle yesterday against the Sheraton Washington Hotel over that all-essential element of congested city life: the parking space.

A three-judge panel of the D.C. Court of Appeals yesterday upheld a 1981 D.C. zoning decision requiring the hotel to provide about 650 off-street parking spaces for guests and visitors. That number was far less than what residents had maintained was required under D.C. law.

"Ridiculous," Roberta Carroll, a long-time leader of the Woodley Park Community Association, said of the decision. The group has fought the battle against the giant corporate owners of the 60-year-old landmark hotel -- the Sheraton Corp., a subsidiary of the International Telephone and Telegraph conglomerate, and the John Hancock Mutual Life Insurance Co.

"To hear them tell it, they have the largest convention facility on the East Coast," said Carroll, of the hotel at 2660 Woodley Rd. NW. "People attend $100 dinners and inaugural balls and they can't get into the place to park. They park in the streets . . . in our driveways . . . in alleys. They shove their cars anywhere and everywhere . . . . Sheraton has 16 acres . . . . You'd think they could find them some space to put their cars."

Sheraton Managing Director Paul O'Neil responded that the hotel provides 700 off-street spaces, 50 more than required. "We try hard, in an awful lot of ways to be a good neighbor," he said.

O'Neil acknowledged that people do "park on the streets if the lots are full, and even when the lots are not. It is their individual choice. But you can take it out of context. It is not an every-single-solitary-day occurrence."

Nevertheless, for nearly a decade, residents of the neighborhood off Connecticut Avenue just above Rock Creek Park have argued that the hotel's off-street parking facilities have lagged behind its "mushrooming" convention facilities, forcing hundreds of cars onto neighborhood streets and even into private driveways. Hotel officials have denied this and their lawyers have fought against adding more spaces.

The neighborhood group has contended that, based on a 1962 order by the D.C. Board of Zoning Adjustment, the hotel was required to provide 898 spaces, according to yesterday's court decision. However, the board ruled in 1981 that its previous orders were "vague, very short and do not specifically require a set number of spaces."

The three-judge panel, in an opinion written by Chief Judge William C. Pryor, agreed with the board's finding that there was "no legal requirement" for the 898 spaces.

The community association could appeal the ruling to the full D.C. Court of Appeals or seek a hearing before the U.S. Supreme Court. Attorney William H. Carroll said he had not seen the opinion yet and did not know if the group would appeal.