Just beyond the bathhouses and central beach in the national wildlife refuge on nearby Assateague Island, a washed-out road winds along the shore toward an isolated sandy southern hook that juts into the Atlantic Ocean.

A nearby marsh on the barrier island is strewn with the road's broken asphalt, remnants of a decade-long struggle between man and the sea.

Here in Chincoteague, the washed-out road has come to symbolize a growing struggle between environmentalists and the region's thriving tourist industry. The town's business people and politicians want the road rebuilt and more parking spaces made available in the refuge to handle the thousands of tourists drawn here each summer.

But the U.S Fish and Wildlife Service, which administers the refuge, is balking. Alarmed over the growing popularity of the refuge, the federal agency has begun, instead, developing a master plan to protect it.

"Our primary reason for existence is the wildlife. That's our mandate by Congress," said refuge manager Dennis F. Holland. "Public use is secondary and permissible only if the land is compatible with the wildlife objective."

Conservationists, citing the refuge's 1.5 million visitors last year, said they fear that the business people want to transform the area into a major beach resort, and they look to the master plan to prevent that.

Judy C. Johnson, president of the Committee to Preserve Assateague Island, declared that Chincoteague's mayor "has persuaded the town leaders that Chincoteague can become a mini-Ocean City, bringing wealth to all . . . . The town will kill the goose that laid the golden egg if it does not recognize that there are limits to the number of people and cars a refuge and a fragile barrier island can stand."

Chincoteague Mayor Anthony Stasio and others countered that they are frustrated with the Fish and Wildlife Service and want the refuge's popular beach freed of its control.

"No one is against the preservation of the wildlife habitat," said Stasio, a former Small Business Administration official in Washington. "But you can overdo a good thing, too. Some people still want dinosaurs around, but you have to be realistic about this."

Because Assateague is a barrier island, its contours are constantly changing. The pounding of the winds and waves shifts the sand, causing the island to edge a few feet westward each year, and to grow on its southern tip. The Assateague lighthouse was built on the southern end of the island in 1883, but now is in the middle of it. The bath houses will probably be under water by 2000, according to some projections.

The wind-swept dunes, lush pine forests and numerous marshes in the wildlife refuge have become a home for wild ponies, Sika deer and thousands of migratory birds, including snow geese and peregrine falcons. The refuge has become the most heavily visited one in the Northeast.

Hotels, restaurants, shops and camping are banned from the refuge, but the visitors have meant jobs for the fishing village of Chincoteague, where the $24 million-a-year tourist trade has surpassed seafood as the No. 1 industry.

"What we have to do is take a look into the future," refuge manager Holland said. "If the past is any indication, we know that the area will continue to be more and more popular. And we know that there will be additional pressures for more growth. Can we accommodate this? Should we accommodate this?"

The agency does not expect to release a draft environmental impact statement on the refuge until March, and townsfolk are not waiting for it. Petitions in favor of rebuilding the refuge road have cropped up in motels and shops across Chincoteague. A meeting on the master plan this summer drew a standing-room-only crowd, and tempers flared.

Holland, who has worked on several refuges and whose father was a refuge manager, said this amount of interest in a refuge is rare.

Environmentalists, who have sided with the Fish and Wildlife Service, are particularly alarmed by town efforts to get state assistance to install a sewer system. That would permit larger motels and more restaurants and shops, drawing still more tourists, the environmentalists said.

Mayor Stasio has said such talk is unreasonable. He said the town needs a sewer system for health reasons because its septic tank system is overloaded, and not because the town has ambitious expansion plans.

The mayor said he does not understand why animals should be given more consideration than a person trying to earn a living. "There is nothing wrong in this world with earning a dollar," he said. "The environmental organizations wouldn't be able to survive if they didn't get money that was donated to them from the profit system."

Rep. Herbert H. Bateman (R-Va.) agreed with Stasio and others that recreational activities are not incompatible with wildlife protection. He has promised to introduce legislation to transfer the refuge beach to the National Park Service if the Fish and Wildlife master plan fails to accommodate recreational needs.

Stasio and Bateman said the park service would be less hostile to recreational activities, a claim that environmentalists dispute. Bateman's bill is expected to have a tough time in the House, where support for the national wildlife refuge system is strong. Last year, Bateman was instrumental in getting the Interior Department to rebuild the road after Holland opposed the project, arguing that it would be washed out. The road was completed in August, and six weeks later it was destroyed by a storm.

"There are several realities that are going to take place in spite of man's best intentions, in spite of Congress' best intentions," Holland said. "There are acts of nature, storms, erosion, the rising sea level. There's not a darn thing that anyone can do about those things."

Robert Conklin, owner of the Sea Shell Motel in Chincoteague, argued that rebuilding the road would help the visitors. There are 120 parking spaces at the southern end of the washed-out road that are now accessible only to off-road vehicles.

William C. Reffalt of The Wilderness Society and other environmentalists are strongly opposed to rebuilding the road and creating more parking. He said the refuge should limit cars even more and use people-movers or shuttle vehicles to get visitors to and from Assateague.

The Fish and Wildlife Service is considering the people-mover proposal and said it could establish a pickup point on nearby Wallops Island, where a National Aeronautics and Space Administration facility is located. That idea alarms Chincoteague shopkeepers who said it would cut down on their business because fewer people would stop in the town on their way to the beach.

Federal officials on Assateague would like to charge entrance fees to cut down on the number of cars and to raise money. However, such fees require congressional approval.

Meanwhile, the waiting time for parking has been getting longer. "If that road is not maintained, then people will not come," said Bill Timmons, who operates a bicycle rental shop and a dress shop in Chincoteague. "And if people don't come, our revenues go down."

Tourists Robert Berendt and Leslie Buhler of Washington disagreed, saying they did not want more parking spaces or roads on the island. They said they came to Chincoteague because they were tired of the more crowded Rehoboth Beach in Delaware. "This has the feel of an unscarred beach," Buhler said.

Bonnie and Mo Handel of Pittsburgh, who have been coming to Chincoteague for seven years, said they can avoid the traffic jams and parking problems at the refuge by renting bicycles. "If it got like the [New] Jersey shore, I wouldn't travel this far to come here," Bonnie Handel said. "There are so few places one can come and see wildlife."