It was in 1958 that the Summer Institute of Linguistics, an American missionary and linguistic group, first began working among the Indians of Brazil's vast, undeveloped Amazon basin. Over the years, the group's activities grew to a point where, by late last year, it was studying Indian languages in 44 tribal areas.

By now, following a conflict with Brazil's interior minister, who opposes encouraging preservation of Indian idioms, the institute has been expelled from Indian areas. Although the group is lobbying to get back in, its efforts have been hampered by an apparent schism within the government over Indian policy and by press charges that the group was engaged in illegal espionage and geological activities.

The decision has forced the institute's 234-member contingent here - mostly Americans, but also some Canadians and Europeans - to suspend its field research. Teams that had been working on alphabet systems, printers, dictionaries and other bilingual material in remote areas are to be replaced gradually by Brazilian linguists responsible to The Ministry of the Interior.

Steve Sheldon, the institute's director in Brasilia, says it is "as much a missionary as a linguistic group." A Dallas-based nonsectarian organization funded by American church groups and individuals, its linguistic research has been aimed at producing a version of the New Testament in the language of each of the Indian tribes being studied.

This emphasis on encouraging Indians to preserve their language conflicts directly with the policies favored by Interior Minister Mauricio Rangel Reis. Some 18 months ago, Rangel Reis ordered the end of instruction in Indian languages in reservation schools on the ground that it was "a waste of time and money" for anyone in Brazil to be taught other than in Portuguese.

At the same time, Rangel Reis announced that he intended to expel religious missionaries, most of whom are foreigners, from Indian areas, charging that they were "dreamers" whose work with the Indians was "backward and feudalistic." He also accused missionaries of "siding with subversives".

After a sharp internal debate within the government in which Rangel Reis was severely criticized by Gen. Ismarth de Araujo Oliveira, head of the National Indian Foundation and an opponent of efforts to force Indians into Brazilian society, the interior minister backed down. Late last year, however, he was quoted as saying institute terms included geologists used mining equipment for prospecting.

The charges were repeated by newspapers here, which also reported Rangel Reis as saying the institute would be kicked out of the Amazon basin because of illegal activities. Rangel Reis later denied this, saying "the government has decided not to renew the agreement" with the institute, judging it preferable that such programs be carried out by "Brazilians specialists."

Brazilians traditionally have looked upon foreign activity in the Amazon with a degree of suspicion. Sensitivity has increased in recent years after discoveries of gold, uranium, diamonds, tin, nickel, bauxite, manganese and iron ore in areas that had been written off as useless jungle.

"Our people aren't geologists and they have done no mining whatsoever," says Sheldon. "We have brought in some equipment to dig wells and do soil analysis so that crop yields can increase, but we have done that only on a limited basis and always with the knowledge of the Brazilian government."

In any case, an institute agreement with the Indian Foundation, which had been in effect for eight years, expired in January and has not been renewed, so the group has removed all its research teams from Indian areas.

According to Sheldon, "no reason was given" officially for the decision not to renew the agreement, but Indian Foundation officials had told him privately that "national security" was a factor. A foundation spokesman in Brazilia said any official statement would have to come from Gen. Oliveira, who was traveling and thus unavailable.

The institute, having been told that there is "no chance" of any new agreement with a government agency, is now attempting to obtain Brazilian university or museum support. "When we pulled out of the tribal areas, we left all our equipment behind and told the Indians we'd back soon." Sheldon said. "Now, though, I don't know about that."