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The Clinton administration plans only a limited challenge to a major court victory for a gay midshipman forced out of the Naval Academy, his lawyer and a Justice Department official said Wednesday.

The Nov. 16 ruling for Joseph Steffan undermines the new compromise policy on gays in the military, but the Justice Department will not attack the core issue in the case.

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Three federal appeals judges had ruled that the Navy cannot expel a midshipman on the basis of sexual orientation - declaring that forcing Mr. Steffan out violated the equal-protection guarantee of the Constitution.

In an appeal expected yesterday, the government will assert that judges exceeded their authority when they ordered that Steffan be granted a commission for the Navy, the department source said Wednesday.

``We are disappointed by the petty effort ... to deny this outstanding midshipman his commission,'' said a statement issued by the Lambda Legal Defense and Education Fund, which is representing Steffan.

Faced with opposition in the military and in Congress, President Clinton crafted a policy ending the ban on homosexuals in the military but forbidding gay service members from declaring their sexual orientation.

Regulations implementing the policy were announced last week. The administration is girding to defend them in court.

Lambda and the American Civil Liberties Union are preparing a court challenge ``to the latest version of the anti-gay policy in the next few weeks,'' Lambda's statement said.

The court in the Steffan case was dealing with the old ban on homosexuals in the military, but its decision brought into question the new policy.

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