The Commission of Fine Arts gave preliminary approval yesterday to plans for a $25-million, five-story underground expansion of the Kennedy Center, housing a theater, recital hall, practice rooms and a nearly 50 percent increase in parking for the center.

The underground addition, designed to be home to a new performing arts institute or conservatory, replaces an abandoned plan to enlarge the existing Kennedy Center building. That larger plan, which would have added two 60-foot wings and cost more than $40 million, was dropped last month primarily because of its cost.

In a separate action yesterday, the commission also gave its blessing to preliminary plans for a 10-story "Arc de Triomphe" at Pennsylvania Avenue and Eighth Street NW, proposed as a $4 million monument to the Navy.

The arch, which would apparently be the largest classical arch in the country, would be the setting for regular outdoor concerts by military bands. It would contain a small Navy museum on top.

Private funds would be raised to build both the Kennedy Center addition and the Navy memorial arch.

Approval by Fine Arts is the major hurdle for both projects, although they still must win approval of the National Capital Planning Commission and final design approval by Fine Arts. The two planning agencies oversee federal construction in Washington.

The Kennedy Center would be Washington's second major institution to go underground, the Smithsonian Institution having recently won approval to build underground museums of African and Eastern art beside the Mall and the Smithsonian Castle.

From the street, the planned Kennedy Center addition, to be formally known as the Institute of the John F. Kennedy Center for the Performing Arts, would appear as terraced gardens, with light wells and a sunken garden in the center. It would have three underground levels of parking and underground access to the Kennedy Center beneath the existing plaza.

Fine Arts Commission Chairman J. Carter Brown called the proposed addition "an imaginative and creative solution . . . for a leftover plot of ground" between the Kennnedy Center and the District end of Interstate-66.

"We appreciate the enthusiastic support of Fine Arts for what for us is clearly a better plan," said the Kennedy Center director of operations, Thomas R. Kendrick.

"In terms of cost, this is one-half or one-third the cost," said Kendrick, "and it is less disruptive than adding wings on the existing building, which would have interfered with programs and parking at the center. It also preserves the integrity of what is a memorial as well as a performing arts center."

While the plans of the architectural firm of Hartman-Cox for the terraced underground addition are specific, showing a 600-seat recital hall, 250-seat theater, 38 practice rooms, music and theater classrooms, faculty studios and 630 parking spaces, the project actually is still in the early stages of planning.

"In design, fund-raising and programming, we're still in the early concept stages," says Kendrick. "So people shouldn't expect to see us break ground on this next week."

The basic plan of Kennedy Center Chairman Roger L. Stevens, despite the reduction in size of the proposed addition, still is "to create an advanced training facility in music and theater with ties to the National Symphony and perhaps eventually to a national theater company," Kendrick said.

The ambitious early plans called not only for extending the Kennedy Center on both ends but for a dormitory for fellows or students working in the institute and for a separate parking garage. The wings would have cost about $40 million and the dorm and garage an additional $20 million, which Stevens said was too much money to raise.

The proposed Navy memorial, meanwhile, has grown significantly in the past two years, from a small bandshell and fountain for outdoor concerts to the giant arch that now is proposed at Eighth and Pennsylvania.

Although the Navy already has several memorials in Washington, it has none dedicated exclusively to it. Congress authorized one in 1977 if private funds could be found to build it.

The huge arch, which will have an elevator, stairs and two floors of space on top, will contain acoustical panels that can be lowered for band concerts as well as dressing and storage rooms for bands.

In the preliminary plan shown Fine Arts, the arch would stand on the north side of Pennsylvania Avenue at the foot of a closed-off Eighth Street, between the classically styled National Archives building and National Portrait Gallery. Modern office/residential buildings, with shopping arcades, would flank the Navy arch and a terraced plaza and fountain.

The arch has preliminary support from the Pennsylvania Avenue Development Corporation, which is to vote on the project today.

The arch design shown to the commission is similar in style to New York's 75-foot Washington Square arch and to the huge Arc de Triomphe in Paris, and would have Ionic columns and statuary on and around it. The Navy arch would be 104 feet high.

Commission chairman Brown called the Navy arch design "a breathtaking idea," although he suggested it might be a little scrawny compared to the "marvelous chunkiness" of some of the historic triumphal arches. Other members called it "a great, joyous addition to the life of the city," and said it would create "a lively space beside the subway stop."