The House and Senate approved legislation yesterday to extend the life of the National Endowment for the Arts for three years, ending months of bitter congressional feuding over the agency.

The provisions in the Interior appropriations bill include elements to dismay the endowment's critics as well as its supporters.

The legislation drops explicit restrictions on the type of art that may be funded. A list of forbidden subject matter was included in the endowment's fiscal 1990 funding bill.

But the bill, which President Bush is expected to sign, requires the NEA chairman to ensure that grants are made "taking into consideration general standards of decency and respect for the diverse beliefs and values of the American public."

The bill increases the percentage of grant money funneled to state arts agencies from 20 percent to 27.5 percent. It imposes a range of changes on grant-making procedures. The NEA has not yet analyzed the effect of those changes, according to Rose DiNapoli, NEA director of congressional affairs.

Endowment supporters are most perturbed by the decency provision. Rep. Pat Williams (D-Mont.), who helped formulate the compromise approach, said he has questions about the constitutionality of the language but considers the legislation as a whole to be "a genuine win."

Rep. Sidney R. Yates (D-Ill.), chairman of the Appropriations interior subcommittee, also said he dislikes the decency provision. But after months of conflict, he said, "You begin to think in terms of acceptabilities."

The language will not affect most grant applicants, but experimental and "challenging" works "will be subject to very close scrutiny under the terms of that clause," Yates said.

Rep. Dana Rohrabacher (R-Calif.), a vocal endowment critic, said the bill leaves taxpayers "without one guarantee that their money won't be used to subsidize things that they believe are totally immoral."

He predicted that some grants will create "new waves of controversy" but said he is bowing out of the fight. He added, however, that the fight could flare up next year.

The bill, which allocates $175 million to the NEA in fiscal 1991, empowers the endowment to recoup funds from grant recipients who have created works the courts have found obscene. NEA can disbar such artists from further grants for three years unless the funds are repaid promptly.

The bill also includes funding for the National Endowment for the Humanities and $327.8 million for the Smithsonian Institution, well above the administration's $307.7 million request, as well as the first installment in a plan to repair the Kennedy Center and eliminate its $15 million debt.