Mayor Marion Barry, promising new vitality to the troubled Shaw neighborhood, announced plans in a campaign-style appearance there yesterday to begin a $5.6 million renovation of the historic Howard Theater at Seventh and T streets NW.

Barry was joined on a flag-draped outdoor stage by Bo Diddley, the pioneering rock-and-roll guitarist who made his start at the Howard at the peak of its influence on black entertainment.

The Howard, built in 1910, was the nation's first major showcase for black performers, a principal stop for 50 years on the "chitlin circuit" linking Baltimore's Royal, Philadelphia's Uptown and Harlem's Apollo theaters. In its heyday, before the riots of 1968 sent the Shaw neighborhood into a downward spiral, the theater helped make the careers of Count Basie, Duke Ellington, Lena Horne, Billie Holiday, Nat King Cole and Cab Calloway.

Yesterday's news conference had a carnival atmosphere befitting the last Friday before an election. Barry is running for an at-large seat on the D.C. Council.

A cassette of Ray Charles crooned from four enormous speakers, which were powered by a generator supplied by the Department of Recreation. Platforms, also courtesy of the city, were erected for Barry and for camera crews wishing to photograph him. Police closed T Street, and the Department of Public Works towed cars from ordinarily legal parking spots. Barry's green and white campaign pamphlets were on every seat.

Not to be outdone, council member Hilda H.M. Mason (Statehood-At Large), Barry's major rival for a council seat, passed out her own leaflets and danced in the street to Charles's rendition of "Georgia On My Mind."

"I look forward to coming back to the theater {upon its completion} in 1993 -- I started to say as your councilman, but I won't put politics into it yet," Barry told a small cheering crowd. "I'll be back."

A spokeswoman for the D.C. Office of Business and Economic Development said the $5.6 million had not been appropriated, but would come out of the office's capital improvements fund. She estimated $450,000 would be spent in the next year to design the project.

Whether the Howard will ever be back as it once was is difficult to predict. Today it stands gutted on a street smelling of urine, next to a boarded-up billiard hall and across the street from the corpse of the old Dunbar Theater. Only one business was open yesterday on the block, and it stocked a variety of liquors by the pint and half-pint flask.

James A. Leslie, who said he lived around the corner in 1944, reminisced yesterday about the long lines to hear Basie and Horne. "I don't think it'll ever be what it was," he said. "It's been out of circulation too long."