A beaming Steven Wallaert embraced his wife and jubilant union supporters yesterday after the former air traffic controller bowed to a modified federal court order ending his week-long jail stay for contempt of court.

Wallaert, head of the controllers' union local in Norfolk and the first controller in the nation to be jailed for refusing an order to return to work, was freed by District Judge Oren R. Lewis after a 15-minute hearing in Alexandria.

Later Wallaert, who had remained in custody longer than any other leader of the striking controllers' union, appeared in Washington before a rally of 300 union workers at the Department of Transportation. "We're going to win this thing," he told the gathering, sponsored by the American Federation of Government Employes.

His release followed Lewis' approval of an amended restraining order directing union officials in Virginia to order back to work only those controllers who still hold jobs. The order also permits informational picketing by union members, but bans harassment by pickets of those trying to go to work.

"I can comply with that," Wallaert said as he stood facing Lewis in the crowded courtroom.

"I know you can . . . , " Lewis interrupted.

"I will. How's that, your honor?" replied Wallaert.

Lewis then freed the slender, dark-haired Wallaert, who had been ushered into the hearing in handcuffs by U.S. marshals.

Wallaert was jailed by Lewis Aug. 5 after Assistant U.S. Attorney Thomas K. Berger produced evidence of statements by Wallaert to reporters that he would disobey an Aug. 3 federal restraining order directing striking controllers in Virginia to return to work.

Wallaert, who faces an uncertain future without a job, said later he believed that "by putting me in jail, the government solidified the union . . . . It was worth it. If the government says the strike is over, it's over, but the problems remain," he said. "The people who run the air traffic system are out in the streets."

During the hearing, Lewis said he would cut the fine imposed on another union leader, Eugene W. Bragg of Newport News, from $5,000 to $4,000. Bragg returned to work at Patrick Henry Airport on Sunday, Lewis said.

Three other union leaders in Northern Virginia are under $5,000 fines for allegedly violating the Aug. 3 restraining order. One of them, John Thornton, a former controller at National Airport, also faces a felony charge of illegal striking.

Berger said yesterday the charge against Thornton is scheduled to go to a federal grand jury in Alexandria when it meets Sept. 8. Berger declined to say whether the charge might be dropped in light of recent developments involving the controllers.

Fines of $250,000 each also have been imposed by Lewis on five controllers' locals in eastern Virginia. A final hearing on the matter is scheduled for Aug. 24, at which time Lewis said he will consider motions to reduce or suspend the fines.