Under Secretary of State Philip Habib, the chief coordinator of the administration's Middle East policy, was hospitalized yesterday for cardiac observation.

Habib's condition was described as "guarded" after he was taken to the Walter Reed Army Medical Center from his State Department office early yesterday.

A hospital spokesman said that Habib's condition stabilized following his admission about 8 a.m., but that some of the initial symptons reoccurred and that doctors were working during the afternoon to bring them under control.

Habib, 57, has had a recurrent heart problem but, according to associates, he has maintained to heavy works schedule.

Habib, a career diplomat and third-ranking departmental official, became ill at his desk about 7:20 a.m. after meeting with Secretary of State Cyrus R. Vance to discuss Mideast developments.

Habib's hospitalization came at a critical point in the U.S. diplomatic activity on the Mideast front, with Israeli Prime Minister Menahem Begin in the city yesterday for talks with President Carter.

Two other key officials in the coordinating effort, Assistant Secretary Alfred L. Atherton and his deputy, Michael Sterner, were in Egypt yesterday.

Habib and Vance returned to Washington Thursday evening after a trip to six Middle East countries. Before joining Vance in Brussels, Belgium, last week, Habib had been in Moscow to discuss the Egyptian-Israeli negotiations.