SWORDS of super-hard Damascus steel helped Islamic armies sweep west to the doorstep of Christian Europe and fight the Crusaders to a standstill nearly a thousand years ago. While researchers have long known where the steel for these weapons came from, they weren't sure of all the techniques used in making it.

Now evidence unearthed in Sri Lanka has shed new light on this early manufacturing process - and overturned some long-held assumptions. In particular, the findings indicate that the ancient metalworkers used unique furnaces that harnessed the mighty monsoon winds to produce high-quality steel on an industrial scale. Until now, experts have assumed that the steel would need to be refined through several steps. They had dismissed such wind-driven technology as impractical.

Moreover, these unique devices produced in one step steel that took competing technologies several steps to refine, according to archaeologist Gill Juleff, who made the discoveries and successfully tested full-scale reconstructions. The furnaces formed the basis for an iron and steel industry on the island that reached its zenith during the first millennium AD.

She adds that her findings represent the earliest dated field evidence for industrial-scale steel production in southern Asia, a key steelmaking region.

The monsoon-fanned furnaces built into the windward slopes of Sri Lanka's hills ''are remarkable installations,'' says Vincent Pigott, associate director of the University of Pennsylvania's Museum of Anthropology and Archaeology. ''You don't know how rare these sorts of discoveries are.''

For eight years, Dr. Juleff, of the Institute of Archaeology at University College London, worked on archaeological surveys as part of a hydroelectric project at Samanalawewa. Juleff found 139 ironworking sites spread over 60 square kilometers, and 77 of these sites used the technique she discovered. At one site, she uncovered 41 furnaces lined up along the western brow of a long ridge. The backs of the open-topped, rectangular clay and stone furnaces were set into the hillside. A typical smelter might be roughly 20 inches high, slightly less than 20 inches wide, and up to 7-1/2 feet long. The front wall was pierced by a low row of tapered tubes, or tuyeres, that channeled air into the smelter.

According to Juleff, whose work appears in the current edition of the journal Nature, most experts assumed that the draft for such a furnace would result when wind blew into it through the tuyeres. As a result, they reasoned, the furnace's temperature would be no more stable than wind is. ''My colleagues said this couldn't possibly work,'' she recalls.

But when she and her team fired up full-scale models, using the same materials and fuels as the originals, they discovered otherwise. Instead of blowing directly into the tuyeres, the wind blows over the wall, creating a low-pressure zone at the furnace top. Faced with a large difference in air pressure between the furnace top and the tuyeres, the furnace in essence sucks the air through the tuyeres continuously. During one test, the winds fell to about 9 miles per hour for about 90 minutes. The average temperature of the furnace - 1,454 degrees C (or 2,649 degrees F) - only fell by roughly 100 degrees C.

At the end of the smelting process, researchers found low-carbon iron, as expected, but also significant amounts of high-carbon steel attached to the slag. Juleff estimates that the known sites produced at least 3,500 tons of iron and steel.

At least two other Asian furnaces resemble the Sri Lankan smelters. One furnace, found in Japan and capable of producing high-carbon steel, has a rectangular shape but uses bellows for air. A rectangular furnace found in Burma uses the height of the furnace to create the needed draft. ''Burmese furnaces have been treated as exotic and put to one side,'' Juleff says. ''Now, perhaps, they will be looked at more seriously.''

More research will be needed, she says, to see if these furnace types have historical ties. Whatever the outcome, one thing is clear, says Dr. Pigott: ''The Sri Lankans got onto a good thing.''