Alexandria tenants and a local developer reached tentative agreement of a housing discrimination lawsuit yesterday after the developers agreed to reserve one-fourth of the Dominion Gardens apartments for low-income residents and to pay up to $2,000 to each family forced to move, sources said.

The tentative settlement also would require subsidies from the federal and Alexandria governments, although the total governmental commitment has not been determined.

The tenants and the Bethesda-based Artery Organization are so close to a final settlement that U.S. District Judge Harold H. Greene postponed a trial yesterday that had been scheduled for Monday. If Greene sanctions the settlement terms, no trial will be held.

The tenants alleged in the suit that, by remodeling Dominion Gardens and raising rents, Artery was systematically and unfairly ousting Hispanics, blacks and Asians.

A similar suit, brought by Alexandria tenants against developers John Freeman and Conrad Cafritz, resulted in an out-of-court settlement last month. That suit ended with 68 of the 275 Bruce Street apartments on Mount Vernon Avenue being set aside for low-income tenants.

Dominion Gardens, which is off West Glebe Road, is a larger apartment complex also in the Arlandria section of the city, where most of Alexandria's poorest residents live. Under the tentative agreement, 104 of the 416 apartments will be reserved for low-income tenants.

City housing officials estimated that as many as 2,000 people, mostly Hispanics and blacks, lived in Dominion Gardens before renovations began this year.

Many tenants left after word spread that monthly rents for one-bedroom units would increase from $385 to $715 and two-bedroom rents from $450 to $845.

Artery's agreement to set aside one-fourth of the units will enable 104 families who qualify for the federal Section 8 housing subsidy programs to use their vouchers or certificates for rent payment there.

Under that program, a family pays 30 percent of its income for rent and the U.S. Department of Housing and Urban Development pays the difference between the family payment and the HUD-defined fair market rent. In Alexandria that is $676 a month for a two-bedroom apartment.

Because the remodeled Dominion Gardens apartments will rent for more than $676, the tenants, city officials and Artery will pitch in to fill the gap. Just how much each party will pay was unresolved yesterday.

Mildrilyn S. Davis, a city housing division chief, said city officials "would be willing to spend up to $450,000" over several years for rent subsidies, if they decided that the final settlement plan was "sound."

Davis said that because the Dominion Gardens apartments will be more expensive than the Bruce Street apartments, the "gap is a lot larger and a harder to fill."

"We've always intended to set aside units and we've been working toward that goal for a year," said Dan Mackesey, vice president of Artery. He said that because subsidy packages include "a great deal of money" and several parties, they are difficult and time-consuming to arrange.

Asked why Artery decided not to go to trial, Mackesey said, "We would rather work in harmony. I don't think that litigation would have served anyone's interest regardless of who had won."

Artery also agreed to pay between $1,500 and $2,000 to 90 families who will be forced to move because of the renovations.

A main point still being negotiated yesterday, several sources said, was how long Artery would agree to set aside the 104 units.

Artery apparently wants to reserve them for five years, while lawyers for the tenants are pushing to reserve them for poor families for 10 to 15 years, sources said.