New Zealand Prime Minister David Lange, embroiled in a policy dispute over nuclear weapons with the Reagan administration, squared off against the Rev. Jerry Falwell, a staunch Reagan supporter, in the Oxford Union debate tonight and won.

A lay Methodist preacher and a formidable parliamentarian, Lange mastered the volatile audience in a way that Falwell could not in addressing the motion that "nuclear weapons are morally indefensible." The vote was 298 to 250.

Lange, who is making a diplomatic tour in defense of his policy barring nuclear-armed and nuclear-powered ships from New Zealand, took the opportunity to tweak critics in Britain and the United States who say he threatens the western alliance.

"I feel safer in Wellington than I ever could in New York or London or Oxford," he said.

Falwell, whose earnest anticommunism earned repeated jeers from a skeptical crowd, said that Lange was defending "unilateral disarmament by the West -- it denies us any freedom to defend our values from a Marxist-Leninist group that believes it must save the world by dominating it."

"May western civilization and its values be morally defended? That is the question here tonight," Falwell, leader of the Moral Majority, said. Hisses and cries of "no, no" echoed in the chamber.

"To me," he said, "it is very immoral when we look at the slavery of communist domination, not to guarantee to my children that they will have the liberties which we now enjoy."

Set in a vaulted chamber modeled on the House of Commons, a Union debate is a highly stylized affair in which students may "intervene" in any speech and debates are won and lost by swiftness of wit.

Last year, when Defense Secretary Caspar W. Weinberger squared off against E.P. Thompson, a cofounder of European Nuclear Disarmament, the Union narrowly defeated the motion "that there is no moral difference between the foreign polices of the U.S. and the U.S.S.R." More recently, Rep. Newt Gingrich (R-Ga.) was praised by the debating society's president for arguing his case with "sheer brilliance" in a losing effort to defend U.S. policy in Central America.

Lange, looking tanned and confident, gave every impression of enjoying the battle immensely.

Mark Gorenflo, a Rhodes scholar from the U.S. Naval Academy, strode up to the brass-inlaid lectern "We do not want to be defended by nuclear weapons." -- David Lange and demanded to know how Lange could justify remaining a member of ANZUS -- the Australia-New Zealand-United States alliance.

"I'm going to give it to you if you hold your breath a moment," Lange shot back. "I can smell the uranium on your breath," he added, to laughter from the galleries.

"We do not shrink from our responsibilities," Lange said, citing New Zealand's military contribution to the western allies from World War I to Vietnam.

"But the fact is we do not choose to be unilateral armers," he said. "There is no balance of nuclear weapons to be achieved in the South Pacific. The balance is there now: there are none. We do not propose to deter enemies which do not now exist.

"We are not creating a policy for export. We can't even export it to Australia -- it's 1,200 miles away," he said.

Another student sarcastically accused Lange of hypocrisy and asked whether New Zealand would be prepared to live without the American nuclear umbrella.

"Not only are we prepared to do without it," Lange replied, voice booming, "we refuse it, and we specifically say we do not want to be defended by nuclear weapons."

"We have been told by some officials in the United States administration that our decision is not, as they put it, cost free -- that we are to be made an example of and that we are to be ostracized and that we are to be convicted of some sort of heresy, not by our enemies, but by our allies," he said.

To compel any ally in this way, he said, "is to take the moral position of totalitarianism, to take away self-determination -- it is exactly the evil we are supposed to be fighting against."

One student, intervening, asked how Falwell's disdain for the communist world could be squared with his Christian morality.

Falwell reeled off a list of Moral Majority projects in the Soviet Bloc and said, "I would ask you, are you a God-fearing Christian? I would ask you, where are you doing your work?"

One student said he had "just a very slight, teeny skepticism" that Falwell could claim to speak for tolerance and western values. Another said Falwell had no right to the mantle of liberty "when your organization would deprive me, as an American, of mine."

Set in the walled and spired heart of this ancient university town, the Union, founded in 1823, has clung to its luxuries and traditions in the face of financial erosion. Debaters still are expected to wear black tie or long gowns, and the Union serves on a sumptuous meal before each debate.

Many of the Union's most famous debates have touched on the moral dimensions of war and peace. In 1933, the Union passed a motion that "this House would not fight for king and country." Winston Churchill, in his memoirs blamed that vote for encouraging Hitler.

A repeat of the motion, debated to international attention, reversed the result 50 years later.