One recent Saturday afternoon, two dozen residents of this city's suburban shantytowns met with two young lawyers in a worn classroom of the Sao Lorenzo Catholic Church.

The occasion was a monthly assembly of shantytown leaders organized and promoted by a special commission of Rio's Catholic archdiocese. And the theme was how poor people can organize to demand titles and city services for land they have illegally occupied.

Here was an example of what liberation theology, the controversial Catholic doctrine of social activism, means in practice in its birthplace in Latin America. For an hour, the group discussed the challenge of consolidating neighborhood organizations in poor areas and debated the agenda for an upcoming meeting with Rio's state governor.

Then they heard some strong advice from their volunteer lawyers. "You can't let fear stop you from doing anything," one church counselor told the group. "The thing to do is to organize and work to improve the community. Because one day, when we have a real people's government in Brazil, all these properties will be turned over to the people, and they won't have to pay."

There was no mention of the Bible, no prayer, and no priests were present. But for Brazil's progressive clergy, such encouragement and guidance of grass-roots organizations of the poor has become the essence of ecclesiastical activity.

Over the course of the last two decades, Brazilian priests have sought to "liberate" their followers by organizing tens of thousands of neighborhood groups around the country and encouraging them to analyze and confront the social conditions around them.

This work has been both a major inspiration and a key testing ground for the "theology of liberation" that has spread through Latin America. Many Catholics have used the doctrine as a justification for social activism and work for the poor, and the movement has influenced churches in Africa and minority and women Catholics in the United States.

For critics both in and outside of the church, the social "preferential commitment to the poor" has often amounted to an unwarranted intrusion into politics guided by priests favoring leftist political causes. Some priests, the critics point out, have openly used the doctrine to justify class struggle and armed Marxist revolution.

Now, with the Vatican's recent release of a major document criticizing some liberation practices, the debate has been elevated to a political and theological plane that augurs a major church conflict.

"The 'theologies of liberation' of which we are speaking mean . . . a church of oppressed people whom it is necessary to 'conscientize' in the light of the organized struggle for freedom," said the document issued last month by the Vatican and approved by Pope John Paul II.

The result, the Vatican said, was "grave deviations" that mixed Marxist notions of class struggle and revolution into religious activity.

The answer of the Brazilians has been quietly defiant. "The situation we are in is one of profound social injustice," said Celso Quieroz, the Brazilian bishop in charge of supervising the system of base communities, in an interview. "It is a situation that provokes the taking of a position. And this taking of position can sometimes be erroneously perceived as accepting an ideology."

"Marx existed," Quieroz added. "No one can erase him from the list. That there is an influence of Marx in all of us can't be denied. It's natural."

The Vatican document and the summoning of radical Brazilian theologian Leonardo Boff to Rome for an interrogation have spurred a flurry of conferences by clergy struggling to formulate positions and a battle of public declarations in the press between conservatives and liberals. "There is a tension between a more establishment church and a more progressive church," said Quieroz. "But it is largely a debate among theologians."

In fact, the one point of consensus among Brazilian clergy seems to be that the polemics over liberation theology so far have had little effect on the practical work that spawned it. Instead, church authorities here say that Brazil's church-guided social movements, like those in other South American countries returning to democracy, are moving toward a new stage of intensified political activism.

"We are seeing a very high level of politicization. . . " said Quieroz. "There is beginning to be a consciousness among the poor that the process should lead to the production of political movements and political leadership."

From the viewpoint of Brazilian priests, this development began in the early 1960s with the decision by the church to expand its work from churches into the communities around them. The result was the formation of neighborhood groups, known formally as ecclesiastical base communities, that met to study the Bible, discuss local problems, or provide community services.

In all these groups, the intention of the progressive clergy was to avoid the "paternalism" of traditional church charity work. Instead, priests sought to stimulate people to talk about and gradually become aware of the social conditions they lived in so that they would organize and lead their own movements for change.

Today, there are about 70,000 base communities across Brazil that have a membership estimated at 4 million. They take part in movements ranging from slum organization to labor unions, human rights work and minority movements.

What this is beginning to mean in practical terms can be seen in organizations like the Pastoral Commission of the Favela, or shantytown, in Rio. Officially formed in 1976, the commission grew out of work by priests and layworkers in the city's poor squatters' neighborhoods dating back to the 1950s.

Today, the favela commission is seeking to foster the creation of a kind of superstructure for the neighborhood groups already well established in hundreds of separate shantytowns around Rio. Led by Italo Coelhi, a priest in Copacabana, it organizes monthly assemblies by shantytown residents and church group members within five large geographical zones.

Shifting the sites of their meetings from slum to slum, these five assemblies follow an agenda set at the beginning of each year for discussions and projects. The church, in turn, provides such support as resources for community newspapers and volunteer lawyers and architects to help the assemblies carry out their initiatives.

The work of these groups, said commission lawyer Aldir Nogueira Pires "is an evolving process with its own logic. You can see the mentality of the people developing. Before, it was often a dependent kind of action, with the people going to politicians and asking for things. Now they go in with a sewer project they have designed, with architect's plans and a contractor lined up, and just demand that the government give them the money for it."

In effect, clergy here say, such church-backed groups are slowly becoming political movements.

"We want to be the connection between the slum organization and the government, eliminating the political parties," said Coelhi. "Because political parties are not in the slums, they are only linked to them. . . in terms of exchanging services for votes.

"What is more important is that the shantytowns organize their own activities," Coelhi said, "because this affirms the self-awareness of the people. That is what we mean by liberation."