The U.S. Court of Appeals, reversing a lower court decision, ruled yesterday that the NAACP Legal Defense and Educational Fund Inc. may continue to use the initials of its parent organization, the NAACP.

"These two great organizations, like brilliant but quarreling family members, must continue to share the NAACP initials with which they were born," said the opinion by a three-judge appellate panel.

The ruling overturned a March 1983 decision by U.S. District Court Judge Thomas P. Jackson.

The NAACP filed suit in May 1982, claiming that use of the initials by the legal defense fund, which broke away from its founder 27 years ago, was creating confusion in the two groups' extensive fund-raising efforts.

Grover Hawkins, NAACP general counsel, said yesterday that the organization had not reviewed the decision and would have no immediate comment.

"We are pleased that the court has found our record a distinguished one as a civil rights litigator," said Julian Chambers, a senior official of the Legal Defense and Educational Fund.

"We are satisfied that we and the NAACP will continue to share in the fight for equal rights and opportunities for black Americans."

Chambers said the legal battle had detracted from the organizations' fund-raising and policy efforts. "Now we can put it behind us and meet the challenge of the current administration's policies," he said.

The directors of the NAACP passed a resolution permitting use of its initials by the legal defense fund in 1939. The fund became a major litigator of civil rights cases during the past three decades.

The two groups split in 1957 after several southern states and the U.S. Treasury Department challenged the defense fund's tax-exempt status.

Southern state officials complained that the fund was too closely allied to the NAACP's lobbying and political activities, and the Treasury Department objected to the sharing of organizational directors and the initials, according to the ruling.

Since 1957, the court said, the legal defense fund has spent $11 million in funds raised while continuing to use the NAACP name.

Tensions rose between the two groups during the 1960s, the opinion said, over fund-raising competition and "a dispute over who should take public credit for successful civil rights litigation."

Although there were earlier attempts to heal the rift, there were no negotiations between the two sides between 1966 and 1978.

In reversing Jackson's 1983 decision, the appellate panel said that the NAACP waited too long to file its suit. "Understandably these two civil rights organizations were reluctant to air publicly a fight among brothers and sisters," the decision said. "But legal precedent requires that this well-meaning motive be objectively evidenced by ongoing negotiation to excuse a stale claim. The NAACP fails to offer reasons why negotiations were not possible."

The decision was written by senior Judge David L. Bazelon and joined in by Judges Abner J. Mikva and Robert H. Bork.