Key Republican and Democratic senators yesterday eliminated an obstacle to the Clinton administration's threatened lawsuit against the tobacco industry.

The agreement strikes restrictive language quietly slipped into a Justice Department spending bill by Republicans last month, which tobacco foes feared would hamper or even prevent the filing of the lawsuit. The lawsuit is bitterly opposed not only by cigarette makers, but by major business groups, led by the Chamber of Commerce, who fear that it may be the opening round of a government legal war on unpopular industries.

The struggle over the tobacco lawsuit came as the Senate worked on a $35.3 billion spending bill for the Commerce, Justice and State departments for next year; it passed on voice vote. The Senate also approved a proposal by Sen. Joseph R. Biden Jr. (D-Del.) to restore $495 million for a fifth and final year of the community policing program that has financed the hiring of 100,000 new police officers across the country. Funding to continue President Clinton`s "COPS" program had been dropped by the Appropriations Committee from the bill's $17 billion allocation to law enforcement. It was restored without dissent.

Biden said his proposal would fund deployment of nearly 4,000 more officers. He also said he intends to seek renewal of the program for another five years to help communities hire an additional 50,000 officers.

As part of the bill, the Senate expanded federal jurisdiction over hate crimes to cover victims chosen because of their sexual orientation, gender or disability. President Clinton hailed that measure as "a big step forward in the journey toward greater protection for all Americans."

Yesterday's agreement on the tobacco lawsuit prevented a battle on the Senate floor. The suit, which the Justice Department is studying, would seek to recover federal money spent to treat smoking-related illnesses.

Bruce Reed, White House domestic policy adviser, said the department "has made real progress in preparing the suit. They've got their best lawyers on the case, and it's in good shape," he said. But he added that Congress still needs to "side with the taxpayers and not the tobacco companies by giving the department $20 million to bring this suit."

Last month, the Senate Appropriations Committee rejected the administration's $20 million request to hire more lawyers and other experts, and Sen. Judd Gregg (R-N.H.) went further, adding language that tobacco foes believed would restrict the department from using any money to fund the lawsuit.

Yesterday, Sen. Bob Graham (D-Fla.) asked senators to reject handing "the tobacco industry immunity" from a federal lawsuit over their past wrongdoing. But a vote was avoided when Gregg, Graham and Democratic Sens. Tom Harkin (Iowa), Richard J. Durbin (Ill.) and Ernest F. "Fritz" Hollings (S.C.) agreed to eliminate the restriction.

Harkin declared it a green light for the lawsuit and a "victory for taxpayers" who "should not have to pick up the tab for the devastation."

An industry spokesman insisted the controversial language "was never a red light." He said the industry's opposition was to the $20 million to pursue cigarette makers, and "the Senate has rejected that."