The Environmental Protection Agency announced yesterday that it is taking steps to ban a spray widely used on apples, peanuts and other fruits and vegetables after finding that the chemical and its byproduct are potent carcinogens in laboratory animals.

The chemical, called daminozide and sold by the Uniroyal Co. under the trade name Alar, has been under special review by the agency since last year. EPA officials said then that Alar caused tumors of the uterus, liver, kidney, blood vessels and lung in laboratory animals.

Yesterday, EPA officials disclosed that Alar also breaks down into an even more powerful cancer-causing substance called UDMH -- a variant of the chemical hydrazine that is used as a rocket fuel -- in the presence of water or acidic conditions. The finding means that Alar's hazards are increased, rather than diminished, by processing.

"When you turn apples into apple juice, more UDMH is formed in the process," said Paul R. Lapsley, head of the agency's special review branch.

About half of the nation's apple crop has been treated with Alar, which penetrates the fruit and cannot be removed by washing or peeling, but EPA officials said processing-grade apples are less likely to have been sprayed with the chemical than fresh-market apples.

According to agency calculations, the lifetime risk of developing cancer from eating Alar-treated crops, including their processed versions, could be as high as 1 in 1,000.

For some groups, the risks may be greater. Infants, for example, might be exposed to "as much as 10 times what we have estimated for the average adult," Lapsley said.

Agency officials cautioned that consumers should not panic, however, noting that the risk figures assume a lifetime of exposure to the chemical.

"We don't believe the risks from this year's harvest present a significant risk," said Lapsley. "But we're interested in getting it off the market as quickly as we can."

Alar, which has been on the market for more than two decades, is a plant-growth regulator. According to the EPA, it is used extensively on apples to delay ripening so that all the fruit in an orchard may be picked at one time, saving labor costs. The chemical also makes apples redder and increases their firmness, reducing shipping damage and increasing storage life.

Alar also is used widely on peanuts to stimulate upright plant growth and thus make harvest easier, and lesser amounts are used to control ripening of cherries, peaches, pears, plums, tomatoes, brussels sprouts and cantaloupes.

According to the EPA, there are no alternatives to Alar, and banning the chemical could cost the apple industry about $31 million and peanut growers about $2 million. The EPA also estimated that the supply of fresh-market apples will drop as much as 7 percent, and consumer costs might rise as much as $1.90 a bushel.

EPA officials said the cancellation of Alar could become final as early as November. But John A. Moore, head of the EPA's pesticide division, said he expected the manufacturer to challenge the decision -- an action that could keep Alar on the market for an additional year or more.

Uniroyal has launched another set of studies in an effort to demonstrate Alar's safety, according to Moore.

"I can't just allow Alar to sit on the market while we wait for those studies to come in," he said. "We don't want to overreact, but we don't want it to persist."