With much fanfare, St. Elizabeths Hospital officially became part of the District of Columbia yesterday in a historic transfer ceremony that included an appeal from patients to perfect founder Dorothea Dix's dream of humane, quality mental health care.

The 132-year-old hospital in Southeast Washington, until yesterday the property and responsibility of the federal government, will be operated by the District's new Commission on Mental Health Services -- a change in status that D.C. Mayor Marion Barry hailed as a boon for patient care and a boost to the city's home rule efforts.

"This is a special day for Washington, D.C.," said Barry, addressing a standing-room-only crowd of several hundred who attended a balloon-festooned transfer celebration on the hospital grounds. "For the first time, the District government now provides complete mental health services to all District residents."

Barry and other city and federal officials joined hospital staff and patients in a two-hour, upbeat ceremony that celebrated the change in hospital authority and warned of challenges ahead as the District moves to shift the focus of mental health care to community centers and group homes.

The mayor called the transfer "one of the happiest moments of my life" but said that for the new commission to succeed, "We're going to need the entire community to assist us."

In a pointed reference to District government plans to set up mental health care facilities in all eight city wards, Barry said D.C. citizens "must not reject" the mentally ill.

"If it weren't for the grace of God, we ourselves would be mentally ill, we ourselves would need the services of St. Elizabeths," said Barry. "We must get our neighbors and friends to love the mentally ill as though they were ourselves."

But one mental health care advocacy group, the Friends of St. Elizabeths, expressed skepticism about District care, and, as one of their members in 19th-century costume played the role of Dorothea Dix, briefly interrupted flag-raising ceremonies at the hospital's quadrangle. The group wants to keep the hospital's west campus as a residential backup for former patients and mentally ill homeless and is opposed to proposals that call for selling the land to commercial developers.

"The city needs to preserve a piece of the asylum for the ill and for those who can't make it on the outside," said Hanna Schussheim, the group's vice president.

It was St. Elizabeths patients, however, who made the most dramatic show of support and concern during the transfer ceremonies. Arms linked and chins high, nearly a dozen of them joined with District and federal officials on the stage, and then invited the city's new mental health commissioner, Robert A. Washington, "to complete the circle of old and new."

"We need the old St. Elizabeths to flower into the new commission," said Elvin McKnight, a member of the hospital's Patient Rights Council.

Washington, clearly a favorite with the mayor and the 3,200 hospital staff members who have become city employes under the transfer plan, received two thunderous standing ovations from the audience.

"Thank God we made it," said Washington, who came to the District from Chicago eight months ago to begin preparing for the transfer. The new mental health commissioner introduced and praised key members of the commission team, and said a unified system will mean better care for District residents.

Washington also spoke directly to patients in the audience, telling them not to be afraid of rejoining the community.

"I hope you will recognize that you do not need the hospital as a security blanket," he said. "You can make it out there with all of us to help you."

Another poignant moment came when Barry asked the audience to give a standing ovation to Polly Shackleton, the former D.C. Council member from Ward 3. Shackleton, the mayor said, had spent "countless hours working with us" on the hospital transfer even though "she comes from a ward where very few of St. Elizabeths' services are needed."

The mental health care transition plan calls for a commission budget of about $157 million and the gradual release of St. Elizabeths patients into community facilties. The current hospital population of 1,470 is expected to drop to about 800 by 1991, when direct federal subsidies to the hospital will end.

Reaction to the transfer seemed overwhelmingly positive among both staff and patients.

Barbara Phelps, also a member of the Patient Rights Council, said the changeover should end "the months of uncertainty and confusion" that had affected patients and staff while the hospital's fate was being debated.

But it was a beaming Del. Walter E. Fauntroy (D-D.C.) who zeroed in on what he sees as another important aspect of the transfer.

"Today is indeed a great day for the state of New Columbia," said Fauntroy, chief cheerleader for the District's efforts to attain statehood and full voting representation on Capitol Hill. "Today we are 336 acres bigger."