In 1966, Michael Hammer, the American agricultural adviser from Potomac gunned down in San Salvador Saturday, brought together 500 Salvadoran campesinos -- the peasant plantation laborers and sharecroppers of that strife-torn Central American nation -- and told them of his visions for agrarian land reform and his promise to help.

The Paris-born son of German parents personally organized and nurtured the agrarian union development wing of the AFL-CIO's American Institute for Free Labor Development here. With the help of $1.5 million in AID funds, Hammer was overseeing efforts to help El Salvador's mmilitary-civilian government administer its program.

"It was a personal obsession with him to do everything he could to see that these people would get their slice of land," said longtime friend and deputy director of AIFLD Sam Haddad.

"Even though he was assigned to oversee operations in a number of Latin American countries, he was intimately tied to El Salvador. He knew the people, went down there frequently. . . . A great leader has been wiped out." Progress in the land reform "will be delayed," Haddad said.

Hammer, 42, had arrived in San Salvador Saturday Morning. He was having coffee after a late dinner at the San Salvador Sheraton Hotel with Rodolfo Viera, the controversial head of the Salvadoran agrarian reform institute and another American consultant when they were slain by two unidentified gunman.

Jean Kirkpatrick, designated by President-elect Reagan to be ambassador to the United Nations, said she knew Hammer as "a very brave man. . . . I shared a lot of views and values and some common activities with him and with others at the AIFLD and the AFL-CIO."

Hammer's and AIFLD's mission, according to AID director Douglas Bennet Jr., was to support the land reform movement in every way possible in the hope, he said, that "if we could get land distributed to the farmers, there would be a much better chance of a moderate outcome to the tense political situation."

Bennet said AIFLD has been providing "technical support" to the peasants during the last several years and "urging the government" to continue with its reforms. "We were in the middle of an extremely difficult process tried many times in many different countries unsuccessfully. We had high hopes" for El Salvador, he said, so the killing "is a very serious loss."

Hammer's task of helping to replace the old Salvadoran farming system, oriented toward plantations and sharecropping, with the concepts of agribusiness and family farms has been "difficult," Bennet said. "The whole structure of the country had to be changed [but Hammer] was terribly effective."

Hammer served with AIFLD in Honduras, Colombia, Venezuela and Brazil as well as El Salvador. Two years ago he was transferred to the Washington headquarters of the organization, where he directed technical assistance programs, the formation of credit cooperatives for peasant farmers and organization of peasant unions.

"It is based on the belief that a just society must have a free trade union movement, like what the Poles are doing today in Poland," said Jesse Freedman, assistant director of AIFLD.

Born in Paris in 1938, Hammer lived his early youth in Ecuador, became a U.S. citizen and was educated in Forest Hills, N.Y., and Los Angeles. He spent four years in the Air Force, studied in Switzerland and then enrolled in Georgetown University, graduating from its School of Foreign Service in 1964. Hammer spoke five languages.

He met the former Magdalena Altares in Spain. They were married in 1962. He also leaves a son, Michael Jr., 15.