President Reagan, proposing a radical change in the Soviet-American dialogue, yesterday challenged Moscow to turn away from enlarging its military arsenal and join in reducing nuclear and conventional forces.

In his first major foreign policy speech, Reagan took a firm but conciliatory tone toward Moscow and offered to cancel deployment of a new generation of U.S. nuclear missiles in Europe if the Soviets would dismantle intermediate-range missiles that they already have deployed.

He also sought to reassure the European allies that the Soviet Union, not the United States, stands in the way of reducing tensions.

In an extraordinary effort to reach Europeans who have been dismayed and alienated by Reagan's bellicose earlier statements, including his insistence that a nuclear war limited to Europe is a possibility, the United States paid the costs of televising his speech by satellite to Europe. The president spoke at the National Press Club.

The initial reaction to Reagan's speech in Western Europe was favorable, but the Soviet Union dismissed it as a ploy that "cannot lead to any positive results."

In Washington, the speech evoked an immediate and strongly positive response from politicians of both parties. Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) called the speech "an important declaration of this nation's intention to sincerely and diligently pursue peace." The Senate Democratic leader, Robert C. Byrd (D-W.Va.), commended Reagan for "'taking the leadership in the effort to bring about disarmament." Senate Majority Leader Howard H. Baker Jr. (R-Tenn.) called the speech "historic." Details on Page A7.

Reagan began on a personal note, recalling his only meeting with Soviet President Leonid I. Brezhnev 10 years ago and Brezhnev's pledge then to work for peace.

Then Reagan summarized a four-point approach to U.S.-Soviet arms negotiations, beginning with a proposal under which the United States would drop its plans to deploy 572 new cruise and Pershing II missiles in Europe if the Soviets dismantled the 600 SS20, SS4 and SS5 intermediate-range missiles deployed in the western Soviet Union.

Reagan's proposal asks the Soviets to abandon an existing asset in exchange for a promise that the United States will forgo future plans, but he explained that the Soviets must do more because their recent missile buildup has created an imbalance between the superpowers.

"The Soviets assert that a balance of intermediate-range nuclear forces already exists. That assertion is wrong," Reagan said.

The president said Soviet acceptance of his proposal "would be a historic step. With Soviet agreement, we could together substantially reduce the dread threat of nuclear war which hangs over the people of Europe."

Reagan's proposal, sent in a letter to Brezhnev about 24 hours before the speech was delivered, breaks the pattern of the last 20 years in which Washington and Moscow have sought to limit nuclear weapons. Arsenals of strategic, long-range missiles as well as the intermediate-range weapons should not only be limited but "substantially reduced," Reagan proposed.

Asked after his speech what reaction he expects from the Soviet Union, the president shrugged and lifted his hands to indicate he didn't know.

Reagan's proposal to reduce intermediate-range missiles will be put on the table Nov. 30 when U.S. and Soviet negotiators are scheduled to sit down in Geneva for their first talks.

"We intend to negotiate in good faith and go to Geneva willing to listen to and consider the proposals of our Soviet counterparts," Reagan said.

Reagan's second proposal to Brezhnev was to resume strategic arms talks in January. A senior administration official said Secretary of State Alexander M. Haig Jr. and Soviet Foreign Minister Andrei Gromyko will hold their first round of talks on strategic weaponry Jan. 26 and Jan. 27 in Geneva. To symbolize his new direction, Reagan noted that these talks will be called START (strategic arms reduction talks) rather than SALT (strategic arms limitation talks).

The president said he told Brezhnev "we will seek to negotiate substantial reductions in nuclear arms which would result in levels that are equal and verifiable. Our approach to verification will be to emphasize openness and creativity--rather than the secrecy and suspicion which have undermined confidence in arms control in the past."

The senior administration official who briefed reporters at the State Department said Reagan's language is not intended to mean that he will accept only on-site inspection. The official said measures which are not entirely under Soviet control could be acceptable and cited Brezhnev's recent statement to a German magazine indicating that the Soviet Union might consider such a method of verification. In the past, Moscow has refused on-site inspection.

"While we can hope to benefit from work done over the past decade in strategic arms negotiations, let us agree to do more than simply begin where these efforts previously left off. We can and should attempt major qualitative and quantitative progress," Reagan said. "Only such progress can fulfill the hopes of our own people and the rest of the world."

The president's third proposal calls for a reduction of non-nuclear forces in Europe. "The Soviet Union could make no more convincing contribution to peace in Europe--and in the world--than by agreeing to reduce its conventional forces significantly and constrain the potential for sudden aggression," Reagan said.

As with intermediate-range missiles, Reagan expects the Soviets to cut conventional forces more than the United States or its NATO allies on the grounds that Moscow enters the negotiations with larger forces.

For his last proposal, Reagan renewed the U.S. call for an international conference to reduce the risk of surprise attacks or of a war arising from a miscalculation.

Reagan ended his speech with a tacit acknowledgement of the growing concern in allied nations. This has occurred partly because the president and his chief foreign policy spokesmen--Haig and Defense Secretary Caspar W. Weinberger--have appeared more interested in talking tough to the Soviets and confronting them around the world than in exploring ways to keep the peace.

"Today I have outlined the kinds of bold, equitable proposals which the world expects of us," Reagan said. "But we cannot reduce arms unilaterally. Success can only come if the Soviet Union will share our commitment; if it will demonstrate that its often-repeated professions of concern for peace will be matched by positive action."

Reagan did not mention a possible summit meeting with Brezhnev. The senior administration official said, "No one is opposed to summitry, least of all President Reagan," but stressed that Reagan does not want to raise expectations by agreeing to a summit unless he can assure a positive outcome of the meeting.

Brezhnev sent a private letter to Reagan recently suggesting a summit meeting.

In addition to avoiding any hostile rhetoric about the Soviet Union--whose leaders, Reagan said in January, reserve the right to lie and cheat to achieve their ends--the president moderated his tone toward the Europeans who have been demonstrating against nuclear weapons and against war.

His speech reflected an evolution of administration policy. On Oct. 1, Reagan criticized those in Europe and the United States who are "increasingly vocal" in spreading a message of "pacifism and neutrality."

On Oct. 27, the White House issued a statement that the European demonstrations were a minority view and would not affect U.S. plans to deploy its new generation of nuclear missiles in Europe.

Reagan said yesterday of the young people who question why we need weapons: "I understand their concerns. Their questions deserve to be answered."

His tone as well as his proposals were intended to reestablish the United States as the reasonable party in the superpower dialogue.

"There is no reason why people in any part of the world should have to live in permanent fear of war or its specter," Reagan said.

The senior administration official was asked what his response would be to the charge that Reagan's speech was a propaganda ploy.

"Nothing could be further from the truth," he replied. "We consider it is now up to the Soviets to respond to these proposals."