The 203-year-old Alexandria Gazette will cease publication as a daily newspaper next month and merge with The Alexandria Port Packet in a twice-weekly publication, according to a spokesman for the two papers' publishing company.

The new paper, which will be called the Alexandria Gazette-Packet, will be published Wednesday and Friday mornings beginning in mid-July, according to William Houser, a consultant to the Alexandria-based Dominion Newspapers.

The merger will bring to a close the independent existence of the Gazette, which claims the distinction of being the nation's oldest continuously operating daily. But it will not mean the end of the Gazette, Houser said.

"The Gazette isn't going . . . . It is being combined," he said.

The move for the paper, which changed its format in February from a broadsheet to a tabloid, follows a troubled period that began in the 1970s, during which the paper was owned by foreign investors for six years and was caught in a downward slide in circulation.

Houser said yesterday that the Gazette's circulation stands at 7,500, a steep drop from the 20,000 copies the paper published in the 1970s.

The Packet, a 12-year-old weekly chock full of ads for local businesses and real estate, is popular for its irreverent style and gossipy articles about local affairs. Most of its 30,000 copies are distributed free, but it turns a profit because of advertising revenue, its owners have said.

Houser said the Alexandria Gazette-Packet will be distributed both for free and by subscription.

Last August, Packet owner John W. Hanes joined with Alexandria developer Peter C. Labovitz to form Dominion, which bought the Gazette from its Hong Kong-based owners, Sing Tao International.

At the time, the new owners said they would operate the papers jointly, and the Packet's editorial staff moved into the Gazette's offices on North St. Asaph St. Many Alexandrians were hopeful that the purchase would mean a revitalization for the Gazette, a much-loved icon in a city of history buffs.

But advertisers continued to show preference for the Packet, and the Gazette was unable to increase its advertising revenue or circulation significantly.

Last month, three top Dominion executives, hired to help rejuvenate the Gazette, resigned, citing philosophical differences with its owners and fears that the Gazette was going to become a free-circulation paper.

Labovitz said then that he was not planning to follow that option. Sources who asked not to be identified said the resignations were caused in part by the executives' unhappiness at Labovitz's increasing involvement in running the daily.

Labovitz and Hanes could not be reached for comment yesterday.

In March, Dominion entered into a joint venture with Reston-based Fairfax Communications to publish the Fairfax Connection and the Springfield Connection, which began publication June 12.

Houser said yesterday that Fairfax Communications' president, Thomas Grubisich, has been "serving as an adviser to Dominion." Several sources said yesterday that Grubisich had been visiting the Gazette's offices regularly in recent weeks.

"We have a sister relationship with Dominion," Grubisich said yesterday. "We have both been giving each other consultation . . . trying to help."

Asked if there are plans for further cooperation between Dominion and his company, Grubisich called such reports rumors, adding: "Nothing of any finality has happened."

In recent weeks, the Packet has run ads for additional carriers and delivery people. Houser said yesterday there are plans to expand the Packet's present delivery routes when the new publication begins next month.