Much of what Ms. Stonor Saunders writes about, including the C.I.A.'s covert sponsorship of the Paris-based Congress for Cultural Freedom and the British opinion magazine Encounter, was exposed in the late 1960's, generating a wave of indignation. But by combing through archives and unpublished manuscripts and interviewing several of the principal actors, Ms. Stonor Saunders has uncovered many new details and gives the most comprehensive account yet of the agency's activities between 1947 and 1967.

This picture of the C.I.A.'s secret war of ideas has cameo appearances by scores of intellectual celebrities like the critics Dwight Macdonald and Lionel Trilling, the poets Ted Hughes and Derek Walcott and the novelists James Michener and Mary McCarthy, all of whom directly or indirectly benefited from the C.I.A.'s largesse. There are also bundles of cash that were funneled through C.I.A. fronts and several hilarious schemes that resemble a ''Spy vs. Spy'' cartoon more than a serious defense against Communism. Traveling first class all the way, the C.I.A. and its counterparts in other Western European nations sponsored art exhibitions, intellectual conferences, concerts and magazines to press their larger anti-Soviet agenda. Ms. Stonor Saunders provides ample evidence, for example, that the editors at Encounter and other agency-sponsored magazines were ordered not to publish articles directly critical of Washington's foreign policy. She also shows how the C.I.A. bankrolled some of the earliest exhibitions of Abstract Expressionist painting outside of the United States to counter the Socialist Realism being advanced by Moscow.

In one memorable episode, the British Foreign Office subsidized the distribution of 50,000 copies of ''Darkness at Noon,'' Arthur Koestler's anti-Communist classic. But at the same time, the French Communist Party ordered its operatives to buy up every copy of the book. Koestler received a windfall in royalties courtesy of his Communist adversaries.

As it turns out, ''Animal Farm'' was not the only instance of the C.I.A.'s dabbling in Hollywood. Ms. Stonor Saunders reports that one operative who was a producer and talent agent slipped affluent-looking African-Americans into several films as extras to try to counter Soviet criticism of the American race problem.

The agency also changed the ending of the movie version of ''1984,'' disregarding Orwell's specific instructions that the story not be altered. In the book, the protagonist, Winston Smith, is entirely defeated by the nightmarish totalitarian regime. In the very last line, Orwell writes of Winston, ''He loved Big Brother.'' In the movie, Winston and his lover, Julia, are gunned down after Winston defiantly shouts: ''Down with Big Brother!''