Last week, the District had two gay bathhouses. Today it has one. The Olympic Baths, which had been open since 1976, closed for the last time, an apparent casualty of growing fear of AIDS.

"Our business started getting bad a couple of years ago," said Carl Aleshire, general manager of the Olympic, located on H Street near 14th Street NW. "Then it just fell apart. We couldn't meet our expenses. People are terrified of getting the disease. You can see it in their eyes."

Probably no issue has caused more anguish and controversy in homosexual communities around the country during the last four years than whether gay bathhouses should be closed as a health hazard. Gay leaders have urged sexually active men to stay away from the baths. And the fear of contracting AIDS -- acquired immune deficiency syndrome -- has been sufficient to put many gay bathhouses out of business.

But gay activists, many of whom have spent years trying to safeguard their civil liberties, bristle at any suggestion that the government should lock the baths.

"First of all, it would do no good," said George Ames, who for the last eight years has run the Club Baths in Southeast Washington near Capitol Hill, the District's only remaining gay bath. "People want a place to go, to meet. It is foolish to pretend that if you closed the baths sex between men would stop."

Ames said the nature of the baths has changed completely and they now now cater to the least promiscuous segment of the gay population, the "highly closeted men, the married men, the military men, the men who cannot just stroll into a bar and strike up a conversation."

He and others contend that the baths are the only place that many men on the fringe of the gay community can go to get the latest information about AIDS.

Although many gay baths have been converted to more traditional health clubs, with exercise equipment and swimming pools replacing private booths and hot tubs, Ames said he has no intention of going that road.

"The leopard is not going to change its spots," said Ames. "The movement to close the baths just pushes gay sex back where it was 25 years ago. In the bushes and the closets. We provide a service, and as long as there is a clientele we'll be here." He added that business, although steady, took a precipitous drop the week after last month's announcement that actor Rock Hudson has AIDS.

Last year, when the public health director in San Francisco decided to ban sexual activity in homosexual bathhouses, sex clubs and the back rooms of bookstores, many in the city's large gay population reacted angrily because, they said, the ban would drive the city's baths out of business.

New York, Miami, Los Angeles and other cities with large gay populations have grappled with the issue, but in each case city officials shied away from attempting to use similar methods to force closings.

"I think many gays would be happy to see them close due to lack of business," said Christine Riddiough, president of the Gertrude Stein Democratic Club, the District's leading gay political organization. "But nobody wants to see the government telling us what to do. In the end it is a basic civil rights issue."

In many cities, a bathhouse, where people can meet easily -- and at times anonymously -- is the central social institution in the gay community. It serves as an oasis for many gays, including those with no interest in anonymous or promiscuous sex.

But as the AIDS crisis deepened and more was learned about sexual transmission ofthe disease, the baths lost much of their clientele.

Earlier this year, Leonard P. Matlovich, a former Air Force sergeant discharged from the service a decade ago after publicly announcing his homosexuality, proposed a voter initiative here aimed at prohibiting sexual activities in bathhouses. It caused a sensation within the District's gay community and got virtually no support from political leaders.

"I was greatly alarmed at the move to close the baths," said Richard Maulsby, executive director of the District's office of cable television and a leading gay spokesman. "This whole epidemic could not have come at a worse time for the gay community. It's being used by people who say we are being punished, and that we are irresponsible hedonists."

Many activists in the District say that even here, in a city with a reputation for tolerance of homosexual life styles and a mayor who has given firm and public support to the gay community, any vote on closing the baths would turn into a referendum on gay life here.

"It's a nasty situation and it makes everyone uneasy to fight for the baths," said Larry J. Uhrig, pastor of the District's gay Metropolitan Community Church. "But we have to hope that the baths [will] run out of their own energy, that education and changing sexual behavior will force them to alter their nature."

For now, the Club Baths will remain open. Ames said he will do anything the gay-oriented Whitman-Walker health clinic suggests.

"If I really thought for a minute we were contributing to the spread of this disease," he said, "I'd get out there and nail the doors shut tomorrow."