Hanover Place, Washington's busiest and most brazen cocaine market, has rebounded from two major police operations in the past 18 months and now is the site of what police call a struggle between local dealers and interlopers from New York.

Gunfire is heard almost nightly on the battered, one-block-long, dead end street near the intersection of North Capitol Street and New York Avenue NW, police and neighborhood residents said. One night last week, police said, about 75 rounds of ammunition were fired in a brief shootout between rival drug organizations. When police arrived, they found no injured people and nobody willing to discuss what happened.

Police officials said they believe the arrest in late October of Cornell M. Jones, 28, who they allege is a major figure in the Hanover Place drug trade, has destabilized the market. Jones, of Guinevere Court in Glenn Dale, is charged with conspiring to possess and distribute cocaine and currently is being held without bond. Police officials said they believe that New York dealers are trying to move in on Washington's most lucrative turf.

Deputy Police Chief Max Krupo, whose area of command includes Hanover Place, said he believes that the recent gunfire also reflects the extent to which business is booming.

"Hanover is a unique place," he said. "We have a strong market there that just won't die. The frequency of the gun reports tells me that we are dealing with a huge market and a large number of customers and sellers who are armed. Sometimes the customers get ripped off and they go back in there with their gun. Sometimes we have a dealer who just wants to get everyone's attention and he will fire a couple of shots into the air."

Krupo said there have been surprisingly few injuries for all the shots fired. "We respond to every call for shots fired, but we tend to find nothing when we get there," he said.

"Either the victims limp off somewhere and get treatment or nobody was hit."

Residents of the area say they have become accustomed to the nightly traffic jams on the narrow street and adjoining alleys.

They have learned how to turn away offers to buy drugs from the aggressive young salesmen, they say, and they know it will be difficult to get a full night's sleep because of the continual street noise.

While Hanover Place is no stranger to gunfire, however, the recent and apparently indiscriminate gunplay has caused new alarm.

"It's getting awful down here," said Leroy Harris, one of the few homeowners left on Hanover Place. "There are a lot of guns on Hanover. There is a shooting every night. It's like they are cops running around here with guns. But they aren't the cops, they are the bad guys. This is not healthy for the people who live here."

Harris, 77, a board member of the Shaw Project Area Committee and the Center City Community Corp., said he has to push his way through the crowd in front of his door when he goes out to meetings.

"I don't understand why the police allow those people to stand out there on the street," he said. "They aren't doing no shopping because we don't have no stores. And they aren't going to no moving picture show because we don't have a theater. And I don't even know who those people are."

Artist Gary Garrison, who lives around the corner, on O Street, said he tries to spend weekends away from the neighborhood so he can get some sleep.

"Every evening I hear gunshots from Hanover or the alleys," said Garrison, who has lived in the neighborhood for five years. "It is useless to try and sleep. It bothers me a lot. I tell my friends that I do three things every night: Set the alarm, brush my teeth and call the police."

In response to sporadic police patrols, the dealers have spread their business into the narrow maze of alleys around Hanover Place. Enterprising sellers have blocked some of them with debris to keep police cars from entering. When police do come by on patrol they are usually spotted at a distance; the dealers vanish into alleys or vacant houses until the officers have left, and then they resume business.

During most afternoons and evenings, drug sellers stand on O Street, North Capitol Street and Hanover Place hawking their drugs to passing motorists. Some yell "half-time," referring to a small packet of cocaine that sells for $50.

Police say cocaine that they have seized on Hanover Place averages 50 percent purity, compared with about 20 percent purity in cocaine sold elsewhere in the city -- one apparent reason for the market's increasing popularity. Customers occasionally create traffic jams as they drive down the alleys leading into Hanover, honking their horns like impatient commuters at rush hour.

Harris, Garrison and other residents have complained to the police for years about the drugs, crowds and noise.

Last year, the police department mounted two campaigns, called Operation Beat It and Operation Beat It II, to rid Hanover Place of drugs. Officers occupied the tiny block, lined with boarded-up buildings and burned-out cars, for two weeks and checked every car entering the block.

The first operation, in June 1984, resulted in 35 arrests on drug charges and nearly 200 arrests on minor charges such as disorderly conduct and traffic violations. The second effort, last December, clearly labeled by police officials as a message to the drug dealers that their activity was not going unnoticed, produced about a dozen drug arrests in its first few days.

Krupo said the department plans more roadblocks and patrols on Hanover Place, but officials realize that simply occupying the block for a period of time is not enough to close down the market. The department now is focusing its efforts on shutting down the drug organizations themselves, he said.

Eric Rudd, an artist with a studio near Hanover Place, said he has watched the police operations come and go for seven years and seen the drug market come back stronger each time.

"I get battle fatigue after a while," he said. "Now they say they want to go after the big guys. I can't disagree with that, but there are residents here and children, and it's hard on all of us. At some point you say, 'I don't care about the long term. Give me the short term and get them out of here.' "