Assistant Secretary of State Elliott Abrams is no longer acceptable as an administration witness on Capitol Hill because of previous testimony misleading Congress, a Senate subcommittee chairman told the State Department yesterday.

A spokesman for Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Foreign Relations subcommittee on Western Hemisphere affairs, said the action was taken after Dodd was notified by State that Abrams would brief his subcommittee Thursday in closed session on developments in Panama. Dodd had asked for a briefing after rioting broke out there last week.

"As far as Congress is concerned, Elliott is a man without a mission. His time is up. There is a price to pay for misleading Congress," Dodd said in a statement.

Dodd and Abrams have often tangled over policy matters, including aid to the contras in Nicaragua, but have been on good terms personally.

An official of the State Department's Bureau of Inter-American Affairs, which Abrams heads, denied that Abrams had been designated to appear before the Senate subcommittee. Jason Isaacson, press secretary to Dodd, said the subcommittee had been notified Friday by the department's congressional relations bureau that Abrams "was available and wanted to come."

Abrams left yesterday morning, accompanied by Undersecretary of Defense Fred C. Ikle, on a two-day trip to Honduras and El Salvador, according to the State Department.

Abrams has come under heavy criticism from members of Congress about earlier testimony, which the assistant secretary acknowledged was misleading, about solicitations of funds and secret resupply efforts for the contras.

Abrams told the Iran-contra panels recently that he had made a "great mistake" in not informing Congress that he had asked Brunei to contribute to the contras but, during heated exchanges, otherwise defended his conduct.

Secretary of State George P. Shultz praised Abrams for "doing a sensational job" and has insisted that Abrams be retained. President Reagan, asked about the controversy during a news conference last Thursday in Venice, gave Abrams a lukewarm endorsement, saying only that Shultz's statements represent the administration position.

Last Friday, 129 House Democrats signed a letter to Shultz demanding that Abrams "resign or be replaced immediately." The lawmakers charged that Abrams "knowingly and deliberately misled Congress" and that he "can no longer function effectively."

Sen. Sam Nunn (D-Ga.), Armed Services Committee chairman and a supporter of contra aid in the past, said Sunday on NBC's "Meet the Press" that Abrams' testimony "has given a real problem to Congress."