Former Office of Management and Budget general counsel Michael J. Horowitz, citing personal and professional concerns, has taken himself out of the running for a seat on the U.S. Court of Appeals here, sources said yesterday.

Horowitz, who had been under consideration for the key judgeship since early October, told administration officials on Monday that he had decided to become a senior partner in a large Washington law firm.

His withdrawal averts what many predicted would be a particularly bloody Senate confirmation battle. A leading neoconservative, Horowitz, 47, was a lightning rod for opposition by civil rights groups and public-interest legal organizations.

His efforts to limit federal funding for the Legal Services Corp. and for groups engaged in political advocacy had angered liberals and some business and labor groups.

The unexpected withdrawal also avoids a vote by the American Bar Association screening committee looking into his credentials. Sources said the often aggressive Horowitz probably would have passed muster, although some organizations had lobbied the ABA, saying he lacked the experience and "judicial temperament" to be on the bench.

Sources said Horowitz, who declined to be interviewed yesterday, had vacillated for weeks over whether to pursue the judgeship. He was not looking forward to a major political battle over his nomination, one source said, and had grown tired of political battles after five years at the OMB.

He left that agency in November to become counsel to the 115-lawyer firm of Dickstein, Shapiro & Morin where, as a senior partner, he is expected to earn about three times the $83,000 annual salary of an appellate judge.

President Reagan has already named five members of the 12-member panel, often called the nation's second most powerful court, after the Supreme Court.