The Rev. Charles E. Curran, who was dismissed from Catholic University's theology faculty in a dispute with the Vatican, last night challenged the Catholic Church to exchange its strictly legalistic approach to sexual teachings for a method that focuses on responsible human relationships and recognizes "gray areas" of moral judgment.

In a lecture at the Washington Theological Union, Curran contrasted growing development in Catholic teaching on social issues, such as war and peace, during the last 100 years with the church's more static approach to sexual teaching.

The church's teaching about sexual ethics continues to follow "a law model," he said, in which "the primary question is the existence of law."

Under this model, he said, "You have only two options: something is either forbidden or permitted . . . . With such a perspective, you don't have room for a lot of gray areas."

He contrasted this with the approach of the Roman Catholic bishops to the nuclear question. The American bishops' pastoral letter "proposes that the first use of nuclear weapons is always wrong, but they recognize that other people, other Catholics, might tend to disagree."

Official church teaching on sexual behavior, on the other hand, states precisely what is right and wrong in questions of complex personal relationships, he pointed out, adding, "I just wish sometimes they'd say, 'We don't know.' "

It was Curran's dissents on sexual ethics that prompted his dismissal from Catholic University's theology faculty. Curran opposed the church's prohibition on contraceptives and argued that abortion and sex outside the marriage are not always wrong.

In August 1986, the Vatican rescinded Curran's license to teach as a Catholic theologian, ending an exhaustive seven-year investigation of Curran.

Because the Vatican-chartered Catholic University requires such a license for theology professors, the university's chancellor, Archbishop James A. Hickey, ordered the popular professor's dismissal from the theology faculty.

Curran, a tenured faculty member, invoked his rights to an investigation of his case by the school's academic senate, as guaranteed in university statutes.

The committee of the academic senate charged with the investigation completed its report last month, well before the Oct. 29 meeting of the school's board of trustees, but Hickey did not place the matter on the agenda. Instead, he notified parties in the case that the matter would be held over for the next trustees' meeting in January.

The action has led to some speculation that the faculty committee report, which has not been made public, was favorable to Curran and that additional time was needed to negotiate a solution that would not violate either the terms of Curran's teaching contract and the school's tradition of academic freedom or the Vatican's edict that he is "neither suitable nor eligible" to teach in the theology department.

All parties to the dispute have agreed not to discuss the report until after the January board meeting.

Last night, Curran, who is a visiting professor at Cornell University this year, made no reference to his troubles with Catholic University.