American University, faced with higher than expected costs and fierce neighborhood opposition, has canceled plans to move its Washington College of Law to the campus of Immaculata Preparatory School at Tenley Circle NW.

University officials said AU would go ahead with the purchase of the 8.2-acre property, but now expects to use it mainly for dormitories and classrooms for AU's Washington Semester program, which has 400 undergraduates from around the country.

The $7.6 million sale, announced in October 1984, will take place in June after Immaculata, an 81-year-old Catholic girls high school, graduates its last class.

The law school, with an enrollment of about 1,050 students, will remain in two crowded buildings on AU's main campus. The university said yesterday that "appropriate consultuations" would be held "on the best ways to meet" space needs.

"We announced in good faith that we were going to renovate Immaculata for the law school," said Anita Gottleib, AU's director of university relations. "But when we added up what it would cost, we realized there wasn't enough money."

The university had budgeted $15 million for the purchase and renovation of the property from the proceeds of a tax-exempt low-interest bond issue approved by the City Council last year. But Jorge Abud, assistant vice president for finance, said final cost estimates, prepared by architects in December, were $20 million.

A statement issued by Milton Greenberg, university provost, and Donald L. Myers, vice president for finance, said the costs had risen partly because of the need to build a large parking lot with landscaped buffers and special lighting to meet neighborhood concerns about traffic, noise and parking problems.

But Abud said this factor alone did not push the project over budget. "I'm afraid we were just wrong" about preliminary cost estimates, Abud said.

The property, at Wisconsin and Nebraska avenues NW, is two blocks from the Tenleytown Metro station but is zoned for single-family residential use. Moving the law school there required approval by the D.C. Board of Zoning Adjustment, where AU's application encountered sharp opposition from nearby property owners and neighborhood civic groups.

The board has not yet acted on the application, but early this month it indicated concern about many of the points the objectors had raised. Yesterday the university said it would present a revised proposal to the board soon.

"We're very pleased that they have decided to withdraw the law school from the site," said Charles Knauss, a lawyer who heads Neighbors Opposed to American University, the group that has been battling the plan. "We do not want a use that is more intense than the girls school and are pleased they are considering an alternative that is more in keeping with the character of the neighborhood."