Steve Stone, the spunky right-handed pitcher who soared out of mediocrity in 1980 to give Baltimore one of the finest pitching seasons baseball ever encountered, gave in to chronic arm trouble today and announced his retirement.

Stone, 34, who has been on the disabled list all season, told General Manager Hank Peters "that he has decided to retire because of the tendinitis that has plagued him for the last two years and which has not responded to treatment," Peters said in a prepared statement.

Stone's contract expires at the end of this season and club officials announced they will keep him on the disabled list, to increase his seniority for retirement benefits.

From his home in Baltimore County, Stone declined to comment beyond saying his decision involved no pressure from the Orioles. He said he would discuss the circumstances fully at an 11 a.m. press conference Wednesday at Memorial Stadium.

Stone had a 67-72 lifetime major league record when he came to the Orioles from the Chicago White Sox via the free agent re-entry draft in 1979. But he was 40-21 in three years at Baltimore, including a 25-7 record in 1980, when he won the Cy Young Award and pitched three perfect innings as the All-Star Game starter.

His .656 winning percentage with the Orioles is a club record for anyone with at least 50 decisions. His lifetime record in 11 major league seasons was 107-93. He originally was signed by the San Francisco Giants and also played for the Chicago Cubs.

Fans of the Orioles and of the niceties of baseball will long remember the ear-to-ear grin and puffed-out chest he carried to the dugout after that flawless All-Star appearance July 8 in Los Angeles.

Stone was reborn under Ray Miller, the Orioles' pitching coach, who reflected on the stubby curve ball pitcher's finest year, as the Orioles waited out a rainstorm that finally forced a postponement of tonight's game with the Texas Rangers. Tonight's scheduled pitchers, Sammy Stewart for the Orioles and Frank Tanana for the Rangers, will pitch Wednesday's scheduled 7:30 p.m. game. The postponed game will be made up Thursday, a scheduled off day.

"He was under .500 (2-3) early in 1980 and he came to me and said, 'What can I do?' " Miller said.

"I told him, 'The players are all mad because you take an hour between pitches.' I told him to pick out his best two pitches, go out there and work fast. He went out and won 14 straight throwing two pitches, either the fast ball and the curve or the fast ball and the slider. Whichever was working better before the game, he'd go with that.

"He was working so fast, guys were calling time out to slow the game down."

Miller said the effect created "almost an aura about him. Guys were making great catches, he was making great pitches, he was working fast and pitching strikes and when he needed the big play he got it because everyone was involved in the game."

But the success was short-lived. In the split season of 1981 Stone suffered from recurring arm trouble, the bane of all breaking-ball pitchers. He spent three months on the disabled list, made only 12 starts and finished 4-7.

This spring, after working all winter to regain his form, Stone was "throwing great," Miller said. On his second start in spring training he had a good slider working during warm-ups "and he kept throwing it, hard," said Miller. "Then he went out in the game and he kept on throwing hard sliders."

After two innings he came out of the game with a sore elbow.

Stone tried everything to iron out the pain--rest, work, shots, physical therapy. He had been continuing to work out with the team and made road trips until the most recent one.

Manager Earl Weaver said Stone was "in good company," citing Sandy Koufax and Dave McNally as greats who had to retire because of arm trouble. "And now it's Stone," said Weaver.