The Environmental Protection Agency announced plans yesterday to complete the $200 million cleanup of Love Canal, 10 years after hazardous wastes surfacing in the basements of the upstate New York community first dramatized the human costs of industrial pollution.

Assistant EPA Administrator J. Winston Porter said the final stage of cleanup, in which 35,000 cubic yards of the toxic chemical dioxin will be dredged from creeks and sewers and incinerated, is "consistent" with the goal of rehabilitating the 10-block area in Niagara Falls once populated by 900 families.

But Porter said that despite years of efforts to contain, pump out and treat the underground pollution, it is still too early to determine whether this last remedial phase will sufficiently detoxify Love Canal. "The issue is whether the dioxin is so ubiquitous that you just can't live there," said Porter, noting that tests will be made next year to determine the extent of contamination.

Love Canal was developed in the 1950s next to a landfill in which the former Hooker Chemicals & Plastics Corp. dumped 21,000 tons of toxic waste from 1942 to 1953, according to the EPA. The community is located one-quarter mile from the Niagara River.

Rising river waters forced contaminated groundwater into the basements of Love Canal residents starting in 1977. The water contained such cancer-causing chemicals as dioxin, benzene and trichloroethylene.

Love Canal, declared a federal environmental emergency by President Jimmy Carter in 1980, became a symbol of the dangers of industrial dumping and spurred Congress to enact the Superfund cleanup program. All but 86 families were evacuated from Love Canal between 1978 and 1980 in a $20 million buyout by the federal and state governments.

Despite its origins, Superfund has aroused controversy at Love Canal over earlier plans to store the wastes in a 25-foot-high facility to be built in the community.

Intense lobbying by Rep. John J. LaFalce (D-N.Y.) and environmental groups per-suaded Superfund managers at EPA to consider other options. They fought for complete removal and destruction of dioxin in the sewers and two creeks running through the community.

Dioxin levels in Love Canal reached 150 parts per billion in its sewers and 46 parts per billion in the creeks, according to the EPA. The safety standard for dioxin in soil is one part per billion.

Yesterday's announcement not only represents a reversal by the EPA but goes far to satisfy the community. Contaminated sediments are to be dredged, drained in a special facility and incinerated to 99.9999 percent purity. The five-year effort, scheduled to begin next year, is expected to cost between $26 million and $31 million.

The incineration residue, which Porter said would be "clean dirt" free of "detectable" levels of dioxin, then will be sprinkled several feet deep on the site.

Porter said that disposing of the detoxified waste at Love Canal will be faster and cheaper than trucking it to burial sites elsewhere -- and less costly politically.

"I suppose nobody would want clean dirt from Love Canal," he said. "It has a stigma all of its own."

LaFalce called the incineration decision "welcome news" that will provide "greater opportunities for productive use" of Love Canal if the New York state health department determines that it is habitable. A ruling is expected next year.

Lois Gibbs, chairman of the Love Canal Homeowners Association, was more wary of the decision, questioning whether the dioxin would be sufficiently detoxified to be sprinkled safely on the site.

"The EPA said there was no cause for alarm years ago," she noted. "Should we believe them this time?"