AOZOU, AOZOU STRIP, AUG. 29 -- Libyan military officers today displayed arms and Chadian soldiers who they said were captured in retaking this desert outpost from Chad.

Chad continued to deny that Libya recaptured the village of Aozou in its first victory after a string of costly defeats in the border area, which both countries claim as their own.

But Libya took six western journalists to the battle site, about 40 miles south of the internationally recognized border between Libya and Chad, to see the spoils of war and its victims.

Libya's JANA news agency had announced earlier that Libyan forces captured Aozou yesterday after a two-hour fight. State-run Libyan radio also carried the announcement and congratulated the military.

The visit offered a rare glimpse of the front, which has seen renewed fighting over the past few years. Libya annexed the 43,000-square-mile Aozou Strip, a barren and sparsely populated piece of land across the northern border of Chad, in 1973. Libya claims the land on the basis of a 1935 treaty between Italy and France that was never ratified. Chad contests this claim, and no other country recognizes the annexation.

Col. Ali Sherif Rify, who led the Libyans, said his forces, using mostly Soviet aircraft, attacked the area first by air, then closed in on the ground and waged a two-hour battle.

There was no definite estimate of casualties on either side. Libyan military officials said Chadian deaths numbered in the hundreds, but only about 25 to 30 bodies were seen.

Much of the village lay in ruins from what appeared to be heavy bombing. Piles of Chadian armaments and supplies were scattered about the village and on the sandy road that led to it.

Strewn in the area were the scarlet berets of the Chadian Army, apparently left behind in haste. The officials said many Chadians fled, and they showed reporters six captured Chadian soldiers and added that 15 others were also being held.

Many of the captured jeeps, armored personnel carriers and artillery were French- or American-made.

The Chadian Army said fighting for control of the area continued this afternoon, according to an Agence France-Presse dispatch from the Chadian capital of Ndjamena.