The Reagan administration is circulating draft legislation that would sharply reduce claims for attorney fees in cases brought by private citizens and public interest groups against state, local or federal governments.

The bill would place new limits on lawyers' fees, require that the first 25 percent of them be paid out of any monetary damages awarded to the plaintiff, and greatly restrict the kinds of cases in which fees can be awarded at all. It would also allow judges to require plaintiffs to pay the government's legal fees in certain cases.

The fee would be made comparable to the price of a federal lawyer's work. Under the formula, the limit today would be $53.16 an hour -- well below the $75 cap now set on some kinds of government legal fee awards and the $100 an hour or more that many experienced lawyers charge.

The legislation, being circulated by Michael J. Horowitz, general counsel for the Office of Management and Budget, would also prohibit fee awards to legal services organizations if any federal funds were used to bring the suit. Horowitz was unavailable for comment on the legislation, which was first proposed in President Reagan's fiscal 1983 budget last February.

Nan Aron, executive director of the Alliance for Justice, a coalition of public interest groups, warned that the legislation would have "sweeping consequences. By restricting attorneys' fee awards, the bill would, in most cases, make the burden of litigating against the federal government too heavy for all but the wealthy to carry."

"It's outrageous. It covers 60 federal statutes -- civil rights, environment, privacy, consumer cases. It reaches almost every area of the law. It's ludicrous. If it passes, it would be devastating," Aron said.

The administration reportedly has had trouble finding a congressional sponsor for the bill.

The draft bill has a provision that would allow courts to force the plaintiff to pay the government's attorney fees when the plaintiff's case was "frivolous, unreasonable or groundless."

In addition, it would prohibit the awarding of fees to any public interest group, such as the NAACP Legal Defense Fund, which already has a staff of working lawyers. A plaintiff represented by such a group would have to prove that the lawyer was hired specifically for his case.

Aron said the cases affected the most would be those involving job discrimination, Social Security disagreements, veterans' benefits, black lung complaints, environmental issues and consumer safety problems.

She said the restriction on legal services organizations, which tend to operate on very low budgets, would "make it extremely difficult and burdensome for any big litigation to take place."

Under American laws, the tradition has been that the plaintiff pays his own legal fees whether he wins or loses. But because of built-in advantages that the government has, federal laws have set out a number of areas where persons or organizations can collect lawyer's fees when they bring successful suits against a government agency.

Ten months ago, the Equal Access to Justice Act went into effect, allowing individuals, small businesses and nonprofit groups to recover fees of up to $75 an hour in successful lawsuits where the government's position was not "substantially justified."

And in some cases, especially in the environmental area, groups or individuals have been able to collect fees even when they lose a case.

In one example provided by a Horowitz analysis of the legislation, the Sierra Club was awarded fees in a case it lost because the suit "substantially contributed" to the goals of the Clean Air Act.

The draft bill would deny all fees in cases that the plaintiff loses.

The plaintiff would also be unable to collect fees out of proportion to the actual damages incurred. The Horowitz analysis pointed to a case in which a federal appeals court awarded the Washington law firm of Wilmer, Cutler and Pickering $160,000 in fees for a case that won $33,000 in back pay for the firm's clients. CAPTION: Picture, MICHEAL J. HOROWITZ . . . cites $160,000 for $33,000 judgement.