The White House Domestic Policy Council approved yesterday and sent to President Reagan a document that establishes rules for regulating the biotechnology industry and is likely to shape the government's attitude toward commercial gene engineering for years.

The document has been awaited for more than a year, and some companies reportedly have withheld products from the regulatory process until they could see how the rules would affect them.

David T. Kingsbury, chairman of the White House's Biological Sciences Coordinating Committee (BSCC), which coordinated formulation of the new policy, said Reagan is expected to approve it this week.

Biotechnology, a new industry, makes products by using the recently developed techniques known as "genetic engineering" since they allow scientists to manipulate the basis of biological life, the genes.

Biotechnology products include drugs, vaccines, pesticides and plants with new properties. For example, one product being developed by Monsanto Co. of St. Louis mixes genes of two bacteria to create a new organism that can poison one of its key pest enemies.

Kingsbury said the new policy establishes a framework under which all federal agencies would regulate biotechnology products. Some products would be exempted and others assigned for regulation by specific agencies, preventing "agency shopping" by manufacturers.

Each agency involved gave the BSCC a proposal containing its regulatory plans, and the committee, after debating each and modifying some, included them in the document.

The document states, in effect, that each product should be considered separately and not be subject to regulation solely because it was made by genetic engineering techniques, he said.

This position was sought by industry and opposed by some critics and environmental groups.

One of the document's most controversial provisions exempts a large group of genetically engineered products from additional regulation.

Three of the first four genetically engineered products, all live bacteria and viruses, have been embroiled in a complicated regulatory process and political opposition and ironically would have been exempt from review under the new plan.

Advanced Genetic Sciences Inc. of Oakland, Calif., maker of one, faces a possible $20,000 fine and an Environmental Protection Agency declaration that the company made illegal and knowingly false statements to the agency.

The new policy leaves details of regulation to the regulating agencies -- chiefly the EPA, the Agriculture Department and the Food and Drug Administration. But it establishes the BSCC as permanent coordinator of federal policy on biotechnology.

Government and industry officials expressed support yesterday for the guidelines, saying that simply clarifying agency responsibility for certain products will be a significant step forward. Some environmental groups expressed opposition.

In general, the EPA is to regulate pesticides and new organisms planned for release from the laboratory into the field, the Agriculture Department would handle products that may be plant pests or cause disease in animals and the FDA would deal with human drugs, foods and food additives.

Allen Goldhammer of the Industrial Biotechnology Association, a trade group, said "we feel fairly comfortable" with these rules.

"It will be a good start," he said, noting that additions and modifications are expected as greater experience is gained in regulating genetically engineered products.

He said Congress should consider the matter and the possibility that a new law covering biotechnology and establishing a new regulatory system for it might be needed.

While most of the new document will become policy when the president signs it, some sections will be published for comments before becoming policy. The major such section deals with definitions, especially because these determine which products will be regulated and how intensely.

For example, experiments that simply cut genes from an organism, a process called "deletion," will be exempt from regulation. Three of the first four products to be reviewed at the EPA and the USDA are "deletion" cases that probably would not undergo regulatory review unless found to fall into some other regulated category, such as organisms that may cause disease.

In another action involving biotechnology yesterday, the EPA halted Monsanto's proposed field test of a genetically engineered pesticide in St. Charles County, Mo. Monsanto spokesmen said the company was "very disappointed" by the action and plans to use the pesticide on a crop now must be abandoned for a year.

John A. Moore, chief of the EPA's pesticides and toxic substances division, said in an interview yesterday that he ordered the testing permit delayed because, while the agency believes that the product is probably safe, more tests are needed to "complete the data set."