The Environmental Protection Agency staff has recommended against priority regulation of formaldehyde as a cancer-causing agent, judging that current studies imply no "significant risk" of serious harm to exposed people.

The action, expected to be accepted by EPA Administrator Anne M. Gorsuch, could have major implications for all government regulation of toxic materials. It also grants a clean bill of health, at least while studies continue, to the multibillion-dollar industry that produces formaldehyde, a chemical pervasive in modern society.

Besides its use in preserving corpses, formaldehyde goes into the resins that bind plywood, wallboard, particle board, furniture joints and carpet backings. It puts the permanent press in fabrics and is produced by burning cooking gas and cigarettes. Urea formaldehyde foam insulation has weatherized 600,000 homes.

The Formaldehyde Institute says products using the substance or derived from it comprise 8 percent of the U.S. gross national product.

The staff recommendation was confirmed yesterday by Don R. Clay, EPA's toxic-substances division director. In effect, it discounts as unworthy of immediate action the findings of two controversial studies in which rats forced to breathe high doses of formaldehyde over a long period developed cancers in their nasal passages.

"We are not saying formaldehyde is not a problem," Clay said, "only that it's not enough of a serious concern that we have to deal with it on a crash basis."

Toxic-substances law requires action within 180 days if EPA finds that a material presents "a significant risk of serious or widespread harm to human beings from cancer, gene mutations or birth defects."

Clay said formaldehyde remains subject to possible regulation.

The two tests in question found convincingly that formaldehyde caused cancer in rats but only at such high doses and under such long exposure times that the criteria of the law are not met, Clay noted.

"In order to have a regulation, you've got to have a risk and, in order to have a risk, you have to have widespread, serious exposure," he said.

Although formaldehyde is widely used, it is such an irritant that people automatically keep exposure to it very low, Clay said.

Concentrations as low as 1.2 parts per million parts of air make eyes water and noses run. At 4 or 5 parts per million, test subjects rebel at further exposure after 10 to 30 minutes. Breathing becomes difficult at 20 parts per million, and the lungs flood at 50 parts per million.

The 1979 study by the Chemical Industry Institute of Toxicology and another confirming it at the New York University Medical Center this year exposed rats to formaldehyde at 10 to 15 parts per million for six hours a day and five days a week for more than two years.

Both found that the rats developed open sores in their noses for a year or so and that many of them then developed cancers.

"It would just be unreal to say that can be compared to the kind of exposure the general population is getting," said a senior EPA official who declined to be identified.

Most action against carcinogens is based on similar studies using high doses. Dr. Arthur Upton, chairman of NYU's Institute of Environmental Medicine, said in a letter to EPA and other cancer regulators last month that the formaldehyde tests warranted regulatory action.

"If the carcinogenicity of formaldehyde is ignored, it would mean that no agent could be regarded as carcinogenic in the absence of positive evidence in humans," he wrote.