Former West German leader Helmut Schmidt, dealing a severe setback to his Social Democratic Party, said today that because of his health he would not run again for chancellor in national elections expected next March.

Schmidt's decison leaves the Social Democrats facing new elections deprived of their best vote getter -- Schmidt was far more popular than his party -- and bolsters the prospects that Helmut Kohl, the new leader in Bonn, will stay in power.

Within his party, Schmidt's departure leaves the field more open for peace-movement leaders to pull the Social Democrats into hard opposition against Western Alliance plans to deploy new nuclear missiles in Western Europe.

Schmidt had used his authority to keep the majority in his party in support of those plans. But some more radical members of the SPD have played leading roles in establishing an activist anti-nuclear movement that is certain to make the missile deployment a major issue in the next elections.

Citing poor health as well as personal political limits, which he said ruled out more compromises on his part with conceivable coalition partners or with critics in his own party, Schmidt said he looked forward to shorter working days, more sleep and longer vacations. But he told a meeting of Social Democratic deputies that he hoped to remain a member of Parliament representing his hometown district of Bergedorf, near Hamburg, and he promised to campaign actively for the party.

The announcement capped a period of intense lobbying of the 63- year-old ex-chancellor by friends and close aides, who were divided over whether he should again lead a campaign following his ouster by the conservatives and Free Democrats in a parliamentary maneuver Oct. 1.

"I have, with a heavy heart, decided not to follow the appeal made to me by the party executive and the Bundestag group" to run again, said Schmidt, who served as chancellor for more than eight years. He said the decision had not come easily, particularly in view of his attitude toward duty.

But having made up his mind, Schmidt asked party colleagues, many of whom had clashed with him bitterly in recent months, to allow him "to leave the center of the political fight in decency." Schmidt concluded, "it is my conviction that this step means a chance to free the way for younger forces in our party."

Speculation about Schmidt's successor immediately focused on Hans-Jochen Vogel, the 56-year-old Social Democratic opposition leader in West Berlin. As a former justice minister, he won Schmidt's favor for his intelligence and for his sensitive handling of West Germany's successful battle against terrorism, resisting widespread calls for more repressive legislation.

Before that, as mayor of Munich, and recently even more so in Berlin, Vogel has demonstrated both tolerance and firmness in dialogues with the country's agitated youth movements. He is reported to be sympathetic to calls by Willy Brandt, the Social Democratic Party chairman, to seek contacts with supporters of the anti-establishment new Green party.

Also mentioned as a possible Social Democratic nominee is Johannes Rau, 51, minister-president of Germany's most populous state of North Rhine-Westphalia. A tireless worker with an easy-going manner that has won him the nickname "Sunny Boy," Rau has managed to keep his large regional party branch united and steadfast during a time of dissension in Social Democratic ranks. He was elected a national vice-chairman at a party congress last spring.

Ironically for the Social Democrats, who have pressed Kohl's conservative coalition to hold early new elections, the loss of Schmidt would appear to make it in their interest now to delay a vote until the regularly scheduled time in 1984. This would give the party time to consolidate and to promote a new candidate for chancellor.

Schmidt's absence could deny the Social Democrats about 5 percent of the vote or more if there are elections next spring. This, at least, was the sympathy vote "bonus effect" that opinion researchers say contributed to the surge in popularity experienced by the Social Democrats in two regional elections after Schmidt's government collapsed.

Schmidt, explaining the reasons for his reluctant decision, said that doctors, following a medical examination last week, advised him to take life easier. Discussing his health more candidly than ever before, he spoke of "three life-threatening illnesses" that struck him over the past ten years and that he was unable to cure in peace.

These included a 1972 thyroid ailment, which Schmidt said has led to a considerable reduction of his thyroid gland and a requirement for daily medication; a severe heart muscle inflammation in 1980, and, in the summer of 1981, a severe heart disturbances that led to implantation of a pacemaker one year ago.

"It would be dishonest to stand publicly for election to an office that I would today seriously have to fear that, for medical reasons, I could only hold for part of the legislative period," the ex-chancellor told party colleagues.

However, Schmidt made clear that political as well as health considerations lay behind his refusal to run again. "Although I am by all means willing to see my own mistakes and omissions," he asserted, "I could not and will not give up essential insights, goals and methods of the policies that I as chancellor, and before that as minister and caucus chairman, spent 16 years, together with others, developing or supporting."

He said he could not imagine negotiating a new coalition after elections with either the Christian Democrats or the Greens. He added that Hans-Dietrich Genscher, chairman of the small, centrist Free Democratic Party, who abandoned Schmidt for Kohl, "could in no way be my partner" again.

Further, Schmidt said, he worried that whatever unity his candidacy might provide his party would be shattered after an election by "some comrades" bent on continuing controversies over nuclear energy, nuclear weapons and other issues. He urged his strife-torn party in the future to show more political discipline for the sake of solidarity.

Although Schmidt's retreat means a boost for Kohl, the new West German chancellor still faces the danger that his junior coalition partner, the Free Democrats, will fail to clear the 5 percent hurdle to stay in Parliament after new elections. The Free Democrats, badly split over their new alliance with the conservatives, anticipate an angry national congress next month.

It is also still unclear how Kohl plans to arrange for new elections March 6. Under existing constitutional rules, he could decide to ask for a parliamentary vote of confidence, and deliberately lose it, which would trigger new elections. Another option under discussion is to amend the constitution to allow the Bundestag to dissolve itself by majority or two-thirds vote.