Interior Secretary Donald Hodel yesterday endorsed a recommendation to create a privately financed conference center on the south half of New York Harbor's Ellis Island, where 12 million immigrants entered the United States.

The center was recommended earlier this summer by the Statue of Liberty-Ellis Island Centennial Commission. The proposal now goes to Congress, which has 30 days to review it.

Dispute over the future of the south half of Ellis Island led Hodel to oust Chrysler Chairman Lee A. Iacocca last year as chairman of the centennial commission. Iacocca complained then that the center, endorsed by the Interior Department's National Park Service, amounted to a "luxury hotel" and would commercialize the historic island.

The center will include lodging facilities, but departmental spokesman Alan Levitt said Hodel had called Iacocca to assure him that the department would not permit commercial development on the island.

"This will not be a hotel, and any activity will be subject to the same high standards that Americans have come to expect and find in our national parks and historic sites," Hodel said in a statement yesterday. He said he envisions the center being used for government conferences and academic gatherings.

Hodel said he is ready to negotiate a long-term lease with the Center for Housing Partnerships, a New York-based developer that proposed the conference center idea to the Park Service more than four years ago. The department said it expects to give the developer as long as nine months to arrange financing before finalizing a lease.

The north half of the island, site of the Great Hall, where immigrants awaited processing, is being restored as a museum set to open in 1989. The south half contained mostly hospitals and contagious-disease wards and was used only by immigrants with medical problems.

As described by the centennial commission last June, more than two dozen of those buildings would be restored for use as a conference center, and the rest of the land would become a public park.