Offering major concessions to Puerto Rican authorities and protesters, President Clinton yesterday agreed to halt live-fire exercises on the island of Vieques and promised that within five years the Navy will abandon the bombing range, a key training ground since World War II.

As part of the deal, Clinton proposed a $40 million aid package for the island's 9,300 inhabitants and promised that the administration would "take all possible steps" to repair strained relations between the Navy and Puerto Rico in hopes of eventually persuading authorities there to allow a resumption of live bombing.

But Puerto Rican Gov. Pedro Rossello, who has repeatedly demanded that the bombing range be shuttered immediately, rejected the offer as not going far enough.

"I am very disappointed by the president's proposal," he said. "It is unacceptable." For more than 20 years a variety of Puerto Rican politicians have criticized the Navy for dealing with islanders in a high-handed manner and for failing to remedy the economic and environmental damage done by its target practice. The breaking point came last April when two errant bombs killed a civilian security guard on Navy property. Faced with angry protests, the Navy suspended use of the target range.

Top military officials characterized the administration's plan as an effort to buy time and win over the people of Vieques and Puerto Rico so that the Navy and Marines could again make use of the 52-square-mile island. The Pentagon insists that Vieques is the only place the Atlantic Fleet can practice amphibious landings with jets dropping bombs and ships firing live ammunition as Marines advance inland.

"I don't think any of us disagree that Vieques is an irreplaceable asset," Chief of Naval Operations Adm. Jay Johnson said at a Pentagon briefing.

"It's the crown jewel of live-fire, combined-arms training. It's the world standard," Johnson said. "We do not want to leave Vieques."

Johnson added that the Navy would conduct exercises on Vieques with nonexplosive ammunition, or dummy bombs, but only as an interim step while pressing for the resumption of live-fire training.

As Clinton personally attempted to negotiate a deal acceptable to Puerto Rico and the Pentagon over the past three weeks, he found himself stymied by hundreds of protesters who are camping on the bombing range. He was also under pressure to forge a solution in time for training due to begin next week in Vieques.

"Even with the governor's support we would not have had a peaceful situation at this point," a senior administration official said. Rossello yesterday called for continued talks, but made clear that what was on the table was unacceptable.

Attorney General Janet Reno advised Clinton this week that even with a substantial deployment of federal agents, an attempt to remove the protesters could lead to violence.

"The attorney general was quite strong in her view that the FBI would be quite unlikely to be able to control the situation and that we needed a breathing space to build consensus behind this plan," the official said.

Nervous about conducting exercises under such circumstances, Defense Secretary William S. Cohen agreed to cancel the imminent exercises involving a battle group and amphibious forces led by the aircraft carrier Eisenhower. Instead, the ships will complete their training in Europe, using a target range in Scotland and Mediterranean beaches. But Pentagon officials insisted that this was a one-time fix.

Another deadline looms soon. A Navy and Marine flotilla led by the George Washington is scheduled to train at Vieques in the spring. Cohen said in a letter to Clinton yesterday that the proposed agreement "will be impossible to implement" if the George Washington and its escorts are denied access to Vieques. Cohen added an even more menacing touch by stating that top military officials have advised him that "the end of training on Vieques would mean a total reassessment of the other military activities in Puerto Rico."

Pentagon officials said the Navy would be likely to recommend closing the Roosevelt Roads Naval Station, an important source of jobs and revenue for Puerto Rico, if it could not resume firing on Vieques.

"We've accomplished two things with this proposal," the senior administration official said. "We have avoided a confrontation this December that the attorney general believed would become unmanageable, and we have created the outlines of a proposal that meets the military needs and is less offensive to the people of Puerto Rico than the previous situation. Now we have to get a dialogue going."

But in Puerto Rico, Independence Party president Ruben Berrios, who has been camped on the firing range for nearly eight months, expressed guarded optimism over the development, which he attributed to the protest movement on Vieques and Puerto Rico's consensus that the Navy should leave.

"Now is the time to strengthen our resolve behind our stand of 'not one more shot,' which has gotten us this far," Berrios said.

The protesters have weathered two hurricanes, and heavy rains this week damaged their camps. But the movement has been growing and receiving more support in anticipation of a presidential decision and possible arrests.

Protesters got a boost this week when a Roman Catholic deacon established a church camp on Navy land. All five local Catholic bishops, including Archbishop of San Juan Roberto Gonzalez Nieves, have thrown their support behind the protest. The church published thousands of pamphlets and began handing them out to parishioners this week.

Administration officials said they hoped the promise to leave Vieques in five years would be taken by Puerto Rico as a substantial show of good faith, and they expected to lure Puerto Rican leaders to the negotiating table with the promise of economic aid, the posting of a senior admiral to San Juan to handle discussions, and an offer to gradually give up Navy land worth hundreds of millions of dollars for development.

The proposal, Clinton said, "provides some breathing space so that the people on the island and the Navy and the Marine Corps can proceed in an orderly and mutually respectful fashion."

Correspondent John Marino and staff writer David Vise contributed to this report from San Juan and Washington.