San Diego Charger quarterback Dan Fouts set a National League season passing record tonight and led his team to a 17-7 victory over the AFC West championship in the last game of the NFL regular season.

The Chargers (11-5) ended Denver's two-year reign as the champs of their division and earned a week off before their first playoff game in 14 years.

Denver (10-6) goes to the playoffs as a wild-card team and plays the Oilers (11-5) at Houston on Sunday.

Fouts, maturing into an All-Pro at age 27, broke New York Jet Joe Namath's season passing yardage record on a 32-yard pass to Charlie Joiner in the third quarter for the go-ahead touchdown. Fouts completed 17 of 29 for 230 yards, 75 more than he needed to eclipse Namath's 4,007-yard sum in 1967.

The game began with a festive atmosphere - "a contest," noted a San Diego Union columnist, "that has caused uncommon excitement in a city where passions are cooled by a gentle climate and soft ocean breezes." $

he Chargers, playoff-bound for the first time since 1965 when they were part of the old American football League, were clearly the talk of the town.

Tickets for the game were sold out 86 days ago, and practically the only ones available were being scalped through the classified ads in the city's newspapers for prices ranging from $25 to $225.

Traffic was jammed on the freeway outside San Diego Stadium by 3:30 p.m., and fans preparing for a 6 p.m. kickoff were already getting well lubricated in the parking lots.

As the game - billed as "How the West Was Won" - began, frenzied home fans waved yellow-and-blue "Chargers Power" banners supplied by a San Diego radio station, chanted "We're No. 1," and sang along with an amplified recording of the local hit song "San Diego Super Chargers."

Fouts, known locally as the "Bearded Bomber," hit Clarence Williams on a 13-yard pass on the game's first play. A Fouts pass bounced off wide receiver Joiners hands and was intercepted by Denver safety Bill Thompson.

The Broncos - shut out the Charger, 7-0, in their first meeting of the season on Oct. 7 - then took a 7-0 lead.

Thking possession for the second time on a punt, they moved 59 yards on eight plays behind Craig Morton, their veteran quarterback who started things by completing a 27-yard first down strikee to wide receiver Haven Moses.

Morton completed three of four passes on the drive, which was aided by two San Diego penalties - encroachment by tackle Gary Johnson and a face mask violation by cornerback Willie Buchanon on runningback Otis Armstring, who had gone around right end for five yards to the Chargers six.

After an incomplete pass, Armstrong found a hole over right tackle for the final three yards and a touchdown. Jim Turner, who suffered a pulled leg muscle in a loss last week at Seattle and turned over the kickoff chores to just-activated Fred Steinfort, kicked the conversion.

The Chargers converted only one of five third-down plays in the first quarter, then missed a 51-yard field goal attempt by Mike Wood on the first play of the second quarter. It was short and to the right.

But they converted a fumble by Morton into a touchdown to even the score less than four minutes later.

Morton was moving his club when, on first down at his 45, he was sacked by Fred Dean and coughed up the ball to be recovered by left end Leroy Jones.

Fouts found tight end Bob Klein over the middle for 20 yards on first down, then hit wide receiver Larry Burton for eight. Ex-Redskin Mike Thomas gained nine yards over right tackle and, after an incompletion, Fouts rolled around right end on an option play for the touchdown that completed a 41-yard march in five plays.

Later in the period, Fouts moved San diego to the Denver 25, despite a holding penalty on left tackle Billy Shields. But after completing passes of 22 yarrds each to Klein and Gurton - playing in place of the injured John Jefferson (bruised ribs) - Fouts threw an interception.

Under pressure from end Barney Chavous, he tried to throw the ball away. Instead he lobbed it over Joiner and right into the hands of cornerback Louis Wright at the Bronco 10.

Morton moved his team all the way downfield in a sustained drive in which he completed seven of seven passes, three to fullback Jim Jensen and two to Dave Preston, then returned the favor.

On second and four at the San Diego nine-yard line, with a minute left, Morton had Jensen breifly open at the goal line, but waited too long to throw the ball. Pete Shaw stepped in front of Jenson and intercepted to kill the drive and end the half.

The Chargers kept the Broncos pinned deep after the kickoff, then exploded for 52 yards in three plays: a Fouts pass to Clarence Williams for seven yards, a 13-yard Williams burst around left end for 13, and a 32-yard scoring strike to Joiner.

With dthat pass Fouts - who had completed 10 of 18 for 142 yards in the first half - increased his season's passing gains to 4,032 yards, eclipsing the NFL record of 4,007 set by Joe Namath in the 14-game season of 1967.

On third and one at the Denver 12, Williams was stopped cold over dthe middle. Wood's 30-yard field goal was good, but nullified by an illegal procedure penalty.

On Wood's second attempt, from 35 yards the center snap hit holder Mike Fuller's hands and spun away. Denver recovered the fumble, and the quarter ended with San Diego ahead, 14-7.

Denver moved to the San Diego 12, where Preston appeared to get a first down but tight end Riley Odoms was offside, wiping it out. Morton tried to hit Preston on the right sideline, but underthrew badly, and the pass was interceptted by linebacker Don Goode on the 10.

Fouts went for a bomb on first down, but his long pass to Burton was intercepted by Steve Foley. Now it was Morton's turn to go for broke on first down, but his long pass for the fleet Rick Upchurch was picked off by Mike Williams - the third interception in three plays.

Denver held and got the ball back on a punt, but Morton was promptly intercepted for the third time, on a badly underthrown attempt picked off by Mike Fuller and run back to the Bronco 25.

The Chargers briefly abandoned their attack and tried to ram the ball in on the ground. The drive stalled, but Wood git a 24-yard field goal with 5:58 left in the game to give San Diego a 17-7 lead.