Pope Paul VI granted a rare audience to a top-ranking East European Communist Party leader, today meeting for almost an hour with Hungarian Communist Party Secretary General Janos Kadar.

The audience was regarded as a step toward reestablishment of full diplomatic relations between the Vatican and Hungary, which were interrupted in 1946 when the Communists took control in Budapest.

It also was thought to be recognition of the personal interest Kadar has taken in church-state relations in Hungary, which have improved appreciably in recent days.

The Communist leader, who has been on an official visit to Italy, viewed Michelangelo's works in St. Peter's Basilica and the Sistine Chapel before going to the 50-minute private audience in the pope's library.

"Your visit is doubtless of general importance and singular meaning," the pope said to Kadar. "It is almost the competition of a slow but uninterrupted process which in the last 14 years, has little by little brought closer the Holy See and the Hungarian Popular Republic . . ."

The Pope added that the Vatican's policy has inspired criticism and perplexity. "It will be judged by history and conscience," he said.

Kadar said after the audience that his meeting with the pontiff was very satisfying and could lead to further efforts to stabilize church-state relations in Hungary.

In recent years, the pope has met with two other East European Communist leaders - President Tito of Yugoslavia and President Todor Zhivkov of Bulgaria. The Vatican has full diplomatic relations with only two Communist governments - Cuba and Yugoslavia.

Today's meeting may bring more opportunities for religious instruction in Hungary and permission for religious orders there to engage in social work.

Those two areas were singled out by Pope Paul as problems that needed solution when he gave an audience to Hungarian bishops in May. At present, religious education classes can be held only twice weekly on church premises and the government suppresses the religious orders carrying out a social ministry.

The meeting between the pope and Kadar is the biggest step toward improved relations since an agreement between Holy See and Hungary was negotiated in 1964.

Hungarian Bishops were nominated in 1969, 1972, 1975 and 1976. Now, in striking contrast to Czechoslovakia, all Hungarian episcopal sees are filled.

Hungarian-Vatican relations improved further when, in 1974, Pope Paul persuaded Cardinal Joseph Mindszenty to leave Hungary. Mindszenty, who died in 1975, had taken refuge in the U.S. embassy in Budapest after the Hungarian uprising of 1956.

Pope Paul was bitterly criticized by those who saw the withdrawal of Mindszenty as a softness toward the Communist regime. Some demonstrators in St. Peter's Square this morning repeated the charges in pamphlets they distributed.

Actually, the Eastern European policy was launched by his predecessor, Pope John XXIII.He sought to recognize that the Communist governments had established themselves in Eastern Europe and to seek agreements that would allow bishops to be appointed, rites to be celebrated, and religious instruction to be given.

It was painful recognition that while the church honors its martyrs, it tries to negotiate minimal conditions to enable the mass of believers to live the faith. When the Communists came to power, 65 per cent of Hungarians were Catholic.

Some Catholics criticized the 1964 Hungary-Vatican agreement not in principle but because, they claimed, the Vatican could have obtained better conditions. They objected, in particular, to the appointment of some members of the puppet-like Peace Priests Association, as Hungarian bishops.

Recently there seems to be a new spirit of church-state collaboration in Hungary.

A sign of this occured last Friday when Hungarian President Pal Losonczi paid his first visit on Cardinal Lazlo Lekai of Estergrom, who was once Mindszenty's secretary and is now his successor as primate in Hungary.