Brazil, traditionally the staunchest U.S. ally in South America, today canceled its 25-year-old military assistance treaty with the United States in a dispute over human rights.

The move followed rejections of U.S. aid by Argentina and Uruguay, also angered by the Carter administration's conditioning of aid on observance of human rights.

The Brazilian Foreign Ministry said State Department report o human rights in Brazil was an intolerable interference in its internal affairs.

Some observers believe that Brazil's strong reaction today to the rights report is due at least in part to the Carter administration's drive to scuttle the proposed purchased by Brazil of nuclear reprocessing facilities from expressed concern to West Germany that the sale might enable Brazil to build nuclear weapons.

At the beginning of this month, Deputy Secretary of State Warren Christopher spent a day in Brazil discussing nuclear issues with Brazilian officials. He left sooner than expected amid reports that the talks had not gone well.

A copy of the State Department human rights report was shown to Brazilian officials last week, and shortly afterward Brazil rejected $50 million in military assistance credits proposed for fiscal year 1978. Today the Foreign Ministry called in U.S. Ambassador John Crimmins to announce that it was canceling the remaining sections of the 1952 agreement, providing for cash sales of U.S. military equipment and officer training. Brazil pays all costs of these programs.

The dispute between Brazil and the United States contrasts sharply with the situation only a year ago when Secretary of State Henry Kissinger visited here and signed an accord that appeared to set up a special relationship between the two countries.

A U.S. diplomat here said the two countries remain allies despite the cancellation of the aid agreement, because they are members of the inter-American defense system and the Organization of American States.

Over the years, Brazil has tended to defend the United States in inter-American meetings, and in 1965 it was the only South American country to support publicly the U.S. intervention in the Dominican Republic. It later sent troops there.

The cancellation of the military assistance agreement was mainly symbolic, since Brazil produces about 75 per cent of the military equipment it uses and purchases most of the rest from Western Europe. A $50 million military assistance grant from the United States for fiscal year 1977 was not used.

U.S. diplomatic sources said the human rights report that triggered the dispute was "very mild." It has been transmitted to Congress but has not yet been made public.

Sources said the report detailed a number of human rights violations in Brazil, including torture of political prisoners and conflicts between the government and the Roman Catholic church.

[A State Department spokesman in Washington confirmed the cancellation of the military aid agreement and said he would have no further comment.]

[SOURCES OMITTED FROM TEXT] the new administration is doing and is going to do in the future to safeguard such rights and freedoms inside the United States.

Meanwhile, in Geneva, Switzerland, U.S. delegate Allard K. Lowenstein said the United States had succeeded in ending a taboo when it got the United Nations Human Rights Commission to discuss the issue of Soviet dissidents. The commission ended its five-week annual meeting yesterday.