A Pan American World Airways jetliner carrying 138 passengers and a crew of seven crashed into a residential area in the New Orleans suburb of Kenner yesterday afternoon. Everyone on board was killed, the Federal Aviation Administration said.

At least four people on the ground also were killed, and rescue workers were digging through homes early today to search for other possible victims or survivors. The death toll was the second highest in U.S. aviation history.

FAA sources said the plane, a Boeing 727-200, took off from New Orleans' Moisant Airport in a heavy rainstorm, then crashed two minutes later, at 5:11 p.m. (EDT). Thunderclouds surrounded the airport at the time, the sources said, and several witnesses reported that lightning struck the plane.

The plane broke apart about two miles from the end of Runway 10. Civil Defense officials said at least 12 residences were set afire.

As authorities continued their house-to-house search within a cordoned-off crash site several blocks wide, one man told United Press International that a woman and her children, who lived across the street from him, were cremated in the inferno that followed the crash.

As many as 20 people were taken to New Orleans area hospitals. One of those hospitalized was 16-month-old Melissa Trahan, found in diapers and rubber pants under the smoldering debris of her destroyed house.

The Rev. Gene Richards, a friend of the family, said, "They were digging through the baby's room. Suddenly, I heard a man holler, 'Get a doctor over here.' Then he began to pull more rubbish out, and there was Melissa. She was faintly crying and dirty and wet from the fire."

The infant was listed in good condition after treatment for second-degree burns on her feet and fingers of one hand. Her mother, Melanie, 26, and sister, Brigitte, 4, were killed. Her father, Gabe, 28, was at work when the plane crashed.

A Pan Am spokesman in New York said the plane, Flight 759, was full. The flight originated in Miami, had stopped in New Orleans and was to continue to Las Vegas and San Diego. A Pan Am official said most of the passengers on the three-engine jet were tourists and fun-seekers bound for Las Vegas.

An original announcement that the plane carried 137 passengers was revised early today when Pan Am determined that an infant and a Pan Am employe riding in a cockpit jumpseat were among the victims.

Pan Am officials identified the crew, all from Florida, as Capt. Kenneth McCullers, Sebastian; First Officer Donald Pierce, Miami Lakes; flight engineer Leo Noone, Miami; purser Dennis Donnelly, Fort Lauderdale; and flight attendants James Fijut, Miramar; Lucille Brown, Hollywood, and Vivian Ford, West Hollywood.

Among the victims were seven members of an Addis, La., family traveling to Las Vegas for the funeral of a relative. Included was the family's 84-year-old matriarch, Mamie Fitzgerald, justice of the peace in the small town near Baton Rouge. Another was her son, an Addis city councilman and former mayor. Other family members on the plane were her three daughters and two sons-in-law. They were traveling to the funeral of another of Fitzgerald's sons.

This was the second major plane crash in the United States this year. The Air Florida accident on the 14th Street Bridge here Jan. 13 killed 78 people, including four on the bridge.

The highest U.S. air-death toll is 273 in the crash of an American Airlines DC10 in Chicago in May, 1979. Two of the 273 were killed on the ground.

Civil Defense officials said the Pan Am plane came to rest in a densely populated area that includes homes and small commercial buildings. An area of four to six blocks was involved in fires, and fire units reported the blazes under control about two hours after the crash.

Huge chunks of hot metal from the plane thudded into neighborhood yards, and a group of children was sprayed with jet fuel, resident Russ Rissmann told Knight-Ridder newspapers. "It was so shocking; it's just hard to explain the terror," he said.

Charles Walton Jr., an employe at a neighborhood market, said, "People were running through the streets on fire. They were screaming. They were burned black."

It was a shocking event for Kenner, an affluent suburb about 15 miles west of the heart of New Orleans, as police turned carports into temporary morgues. Bodies and pieces of bodies were placed in plastic bags or wrapped in sheets.

The plane, which had refueled before takeoff, was carrying 8,090 gallons. In sealing off the crash area, authorities had been concerned that fuel tanks in the broken fuselage and wings might explode.

"We have information from the FAA, who has been in there, and there doesn't appear to be any survivors from the plane," said Al Sella, director of Fire and Emergency Services for Jefferson Parish (county). "We don't know the casualties that might be on the ground. We are just marshaling our forces to go in and see. We had to handle that fire situation."

"It was like a big vacuum cleaner went through," said Victor Dean, a Pan Am employe who lives near the crash site.

Sharon Smith of the Kenner fire department said that debris covered several blocks and that black smoke blanketed the area hours after the crash. "It sounded like a tornado going over, and my dishes fell down," said Fay Meyer, who lives a block from the crash site. "It clipped off part of my palm tree."

Kathy Bright, who lives in the neighborhood, said the burning plane, its fuselage broken open, came to rest against a two-story house, also burning.

"I heard the noise of the plane, and I looked up . . . to see what fool plane would be taking off in that kind of weather . . . . The plane just exploded and went flat down . . . ," Bright said.

Bright said she saw a flash, then flames. "It was an inferno . . . there were people running around and screaming. There was total mass confusion."

She said one lady was screaming, "Oh, my God, where's Sandy? Help me find Sandy."

Bright said that visibility was only 25 to 30 feet and that she saw clothing, furniture and lawn chairs strewn about. "There was so much fire it was impossible to say. I saw at least five houses on fire," she said.

The plane, she said, devastated four blocks of Webster Street, which she described as containing ranch-type frame houses and three nursery schools.

Most of the houses were occupied, she said, by families with children. "We go trick-or-treating over there. There's lots of kids," she said.

Aviation sources agreed that there was too little information last night to speculate on the cause of the accident. But weather and the dangers it poses to flight were high on the list of preliminary suspects.

A lightning strike in itself is not particularly unusual, aviation industry sources said, but is rarely a factor in an accident, usually leaving a small burn mark, but doing no damage to a plane.

However, lightning was blamed for the crash of a Boeing 707 near Elkton, Md., in 1966. In that case, the National Transportation Safety Board found in a much-debated ruling that lightning had ignited fuel fumes in a vent, causing an internal explosion that resulted in a wing failure.

Severe thunderstorms can knock any jetliner out of control. A plane encountering severe turbulence in the criticial moments immediately after takeoff or before landing would be particularly susceptible because it would have little altitude in which to recover from the control problem.

The strongest winds usually precede a thunderhead. "You're much better off in the middle of a storm than you are on the edge of it," an aviation expert said last night.

One witness yesterday told UPI that the plane's engines "went silent" just before impact. In only one crash on record--that of a Southern Airways DC9 over New Hope, Ga., in 1977--did a torrential rainstorm literally drown both of the engines.

Kenner Mayor Aaron Broussard said, "Apparently as the plane was taking off, the engine simply stopped."

The Boeing 727 is the most flown airliner in the world. Boeing has sold more than 1,800 of them, and 1,042 of those are in domestic service. A total of 36 Boeing 727s, including the one that crashed yesterday, have been lost in accidents.

Pan Am began flying the 727 when it acquired National Airlines and National's fleet of 727s in 1980.

Boeing and FAA officials were flying to New Orleans last night to join an investigation team being organized by the National Transportation Safety Board. Thomas McCarthy was named investigator in charge, and board member Patricia Goldman accompanied the team.