After two hours of emotional appeals from Capitol Hill residents, the Advisory Neighborhood Commission representing the Eastern Market neighborhood unanimously rejected a proposed $3.8 million renovation of the 116-year-old city-owned landmark, saying it would "pose a risk to the character of the market and to its essential function as a working retail food market."

With eight of the 12 commissioners present, the ANC voted instead to support a more modest plan to refurbish the market's interior, increase the number of merchants within the market, and put the market under new management.

The action, which is not binding on the city, was roundly applauded by the nearly 200 merchants and neighborhood residents who filled the market's North Hall last night. The market's future has been a topic of acrimonious debate since last month, when a committee appointed by Mayor Marion Barry proposed the massive redevelopment.

After 18 months of study, the committee had recommended tripling the number of food vendors, adding a mezzanine with chairs and tables for dining, building a stage for live performances, and allowing the sale of beer and wine.

The ANC's counterproposal was based on plans submitted by a group of residents who have been lobbying against the committee's recommendations. Before the vote, the Citizens Committee for Eastern Market presented the ANC with petitions bearing nearly 1,400 signatures calling for limited renovation.

"Let's not make it Taj Mahal, let's keep it Eastern Market," said James Kidney, a member of the citizens committee.

Kidney said residents had been "locked out" of the committee's decision-making process. He said the committee should have posted its suggestions in the market and solicited comments from patrons before issuing its report, a remark that brought cheers from the audience.

Three members of the mayor's committee who attended the meeting agreed to extend until July 31 the time the public has to comment on the report. A new report will then be submitted to the mayor, according to committee member Peter Eveleth.

The goals of the committee, according to the report, were to maintain the market as "a community asset" and to keep it "economically self-sustaining." Eveleth said that a survey by the consulting firm of Dewberry & Davis in 1982 showed that Eastern Market customers were dissatisfied with the high prices and limited variety of foods offered for sale.

"Everyone knows about Eastern Market. What they don't do is spend their money there," Eveleth said.

One issue that has yet to be resolved is the management of the market. Since 1958 the task of overseeing the market's operations has fallen to members of the Glasgow family, who rent the building for $10,000 a year and lease vending space to other merchants.

The mayor's committee recommended creating a community development corporation to manage the market. Such a corporation would determine the kinds of businesses the market needs, be responsible for the market's finances, and act as a liaison between the community and the city.

Council member Betty Ann Kane (D-At Large), who said she was attending the meeting both as a city official and as a Capitol Hill resident, was among the signers of the neighbors' petition. Kane said any proposal to redevelop the market, which would likely require city funds, would have to be approved by the council.