ANNAPOLIS, JAN. 6 -- Noel C. Koch, identified by Maryland Republicans as one of their top candidates to challenge U.S. Sen. Paul S. Sarbanes, dropped out of the race today, saying he believes Sarbanes is unbeatable.

"We didn't think we could win the general" election, said Koch, a Potomac resident who was once the Defense Department's chief expert on counterterrorism and who was a witness in last summer's Iran-contra hearings.

"I don't think if you talk to a Republican who's candid you'll find anyone who thinks it's winnable," he added.

Koch (pronounced cook) was one of 10 little-known Republicans who signed up last month to challenge Sarbanes, who is seeking his third term. He said at the time that he would have to be sure that the money was available -- he said that it would cost $2.5 million to $3 million to run against Sarbanes -- before he would commit to the challenge.

But he said today the bigger problem was whether Sarbanes was vulnerable. Koch said he consulted a number of politically astute friends, such as ABC newsman Ted Koppel and Philip Merrill, publisher of The Washingtonian, before deciding that Sarbanes was too strong.

Koch said he also discovered that in Maryland politics, a candidate from Montgomery County is considered something of a pariah.

Nevertheless, Montgomery is also the home of the party's other top candidate. Party officials are talking up Thomas L. Blair, a 43-year-old Potomac resident who is a founder of Jurgovan & Blair, a Rockville health maintenance organization consulting firm. Blair sold the company last year for $35 million, and party officials say Blair has told them he intends to spend a substantial amount of his own money on the race.

Blair has declined to speak with reporters until his formal announcement.

Koch and Blair were the only Republicans courted by the national party who signed up for the race. Others, such as former U.N. ambassador Jeane Kirkpatrick and state racing executive Frank De Francis, declined. The lack of interest has been attributed to Sarbanes' head start on fund raising, his strength in Baltimore, the most politically important section of the state, and the historic weakness of the Maryland Republican Party.