The U.S. State Department has promised to wage an all-out battle to overturn a D.C. City Council-passed ban on locating embassy office buildings in two wealthy Northwest neighborhoods.

A State Department official said if the department could not persuade D.C. Mayor Marion Barry to veto the "unduly restrictive" council bill, the department would probably take its fight to congress.

The mayor is awaiting a legal opinion on the legislation before making a decision on it, a spokesman for the mayor said.

Most city-passed legislation, including the chancery bill must go to both houses of Congress for a 30-day review period. If both chambers reject the legislation during that period, it does not become law.

In passing the bill Tuesday, local officials have "created a conflict" between themselves and the federal government and placed federal interests "in an untenable situation," the State Department said in a strongly worded statement issued yesterday afternoon.

"Local officials no longer are balancing" the federal government's needs against those of the city, the statement said. "The Congress will be better able to make a balanced decision," a department official added.

The dispute between the State Department and the city has been simmering for a year since Council Member Polly Shackleton (D-Ward 3) and Barry, then an at-large Council member, introduced a similar bill.

The pending bill was prompted by a D.C. Zoning Commission decision last year that would have created a special zone for chanceries along Massachusetts Avenue from Dupont Circle to 34th Street NW and along 16th Street NW. The bill would ban the embassy offices in all but commercial and apartment zones.

Resdients in the two affected areas, whose homes sell for $350,000 and up, have long argued that the chanceries would clog their quiet tree-lined streets with traffic and cause other disruptions.