Congressional Republicans and the White House tentatively agreed last night on a nearly $1.4 billion plan to hire new teachers and reduce class size, clearing away one of the major obstacles to a final compromise on the budget.

GOP leaders dropped their efforts to convert the money to a block grant that would leave local school boards with broad discretion in spending the funds. At the same time, the administration signaled a willingness to provide local schools with more flexibility to use the money for teacher training, according to GOP and administration negotiators.

The money would represent the second installment on a seven-year program by President Clinton to finance the hiring of 100,000 new teachers, the central feature of his education agenda. Aides had made it clear that the proposal was perhaps Clinton's top priority in budget negotiations, and yesterday's compromise signaled that the two sides were moving rapidly to bridge their last remaining differences.

Administration officials and Democrats remained cautious that the two sides could wrap up on key spending bills by week's end, as some Republican leaders predicted. But with members anxious to recess for the year, Republicans were clearly in a compromising mood, and they moved closer to the Democrats on a broad range of issues.

In addition to the agreement on schools, Republicans agreed to add $1.35 billion more to a huge labor, health and education bill for a broad range of programs, including childhood immunization, infectious diseases, Hispanic initiatives and occupational safety programs. GOP leaders nearly doubled the amount of money they previously were willing to provide for Clinton's desert and ranch land acquisition program, to $475 million, though still short of what the administration has sought.

The Republicans have also added money for Clinton's program to hire 50,000 more police officers and other law enforcement programs, and GOP lawmakers said they were nearing an agreement with the Treasury Department over international debt relief.

Still, the GOP was balking at last-minute White House demands for more money for the National Endowment of the Arts, the Smithsonian and state land and water programs. GOP leaders and the White House also remained deadlocked on abortion language holding up payment of nearly $1 billion in dues owed the United Nations.

But it seemed clear yesterday that a budget battle that began in January with sharp partisan rhetoric over taxes and Social Security was winding up on a fairly business-like basis. More than a month after the start of the new fiscal year, Congress and the administration finally appeared close to working out differences on the five annual spending bills that have yet to be approved. Any deal must be ratified by the full House and Senate.

The president has already signed the eight other spending bills that help finance the federal government's operations.

While the GOP has been reluctant to engage the administration directly over spending issues until recently, high-level intervention appears to have played a role in getting the talks back on track after they appeared to snag Tuesday.

Early yesterday, Clinton spoke separately with Senate Majority Leader Trent Lott (R-Miss.) and House Speaker J. Dennis Hastert (R-Ill.). House Majority Leader Richard K. Armey (R-Tex.) later announced that the House would try to "complete our work for the year" Friday.

Lott, who spoke three times with Clinton yesterday, said that the two sides were fairly close to a final deal. "There's not much difference in what we're talking about," Lott said.

The breakthrough on Clinton's signature program to hire more teachers followed weeks of intense talks and occasionally emotional exchanges. Both sides view education as a major issue in next year's campaigns and have offered proposals for greatly increasing funding.

But Republicans pressed this year to give local school boards more latitude in how to spend the extra money. The White House insisted that the money be used by school districts first to hire enough teachers to reduce the ratio of students to teachers to 18 to 1, before the money could go for other priorities such as retraining teachers. Republicans led by Rep. William F. Goodling (Pa.) and Sen. Arlen Specter (Pa.) held out for an approach that would allow school districts that did not believe they needed to hire more teachers to use the funds for other purposes.

In the end, the two sides agreed to an approach that would assure the bulk of the money went for hiring teachers--but increased from 15 percent to 25 percent the amount money that could go for professional development. Overall, Republicans agreed to give Clinton $1.325 billion of the $1.4 billion he requested for the program this year.

The Republican eagerness to complete the talks this week reflects, in part, leadership concerns that the longer the negotiations drag out, the more time the administration and individual members have to make last-minute demands.

Clinton has proved adroit in the past in squeezing out big concessions in the final days of talks, and this year is no exception. "We've made some real progress in putting 50,000 more police on our streets, we're making some progress in other areas," Clinton told reporters in the morning, before departing for Pennsylvania. Moreover, there has been a rash of last-minute pleading by House members and senators, who view the spending bills as their last opportunity to secure wanted projects or legislative language.

"Members have their pet projects, a little more money for my visitors' center here or a little more money to buy a piece of land there," said Rep. Ralph Regula (R-Ohio), a key member of the Appropriations Committee.

One of the most nettlesome problems centers on whether to tie the payment of U.N. dues to abortion restrictions. Rep. Christopher H. Smith (R-N.J.) has insisted any payment include language barring international family planning groups from lobbying for changes in abortion laws overseas, known as the Mexico City policy, and he said House leaders have continued to back his position.

"Everybody is totally on the same page," Smith said. "We could stay here till Christmas, for all I care. If it means a protracted negotiation, so be it."

Some GOP leaders also are continuing to insist that the administration come up with budget cuts or savings to offset the new spending. "They have presented us with a bonanza of new spending, but not one credible proposal for how they're going to pay for it," said Michael Scanlon, a spokesman for House Majority Whip Tom DeLay (R-Tex.).

White House officials presented Republicans with a list of proposed budget cuts last night, but negotiators adjourned for the evening without reaching an agreement on whether to adopt them.