The Zyklon B gas found at Auschwitz and other camps, it says, was used only to delouse the clothing of inmates, and what have been described as gas chambers were really ''mortuaries'' where bodies were taken after deaths occurred before they were burned.

In an interview, Lewis Brandon, the institute's director, said of reports of the Holocaust: ''It's a myth, using the big lie technique, perpetrated solely to give the Zionists a shield against criticism of Israel and to justify massive American aid to Israel.''

An objective analysis of the available evidence, he contends, refutes the orthodox view of the Holocaust. Regarding the Hoess account, he says, ''His confession was made under duress.'' Organization of the Institute

The Institute for Historical Review has its headquarters near Los Angeles in the suburb of Torrance. According to public records, the institute and its publishing arm, the Noontide Press, operate under city licenses issued to the Legion for the Survival of Freedom, Inc.

The treasurer of this organization is Elizabeth Carto, the wife of Willis Carto, who is treasurer of the Liberty Lobby, a 25-year-old organization based in Washington that has a reputation for supporting extreme rightist causes.

Mr. Brandon acknowledged that Mr. Carto, who has a home near its offices, was the founder of the Institute for Historical Review. But he said that it had no financial or other ties to the Liberty Lobby and that the organization did not receive financial support from Arab interests or pro-Nazis. ''About 20'' of the 2,500 or so people who regularly purchase its literature live in Germany, he said. 1944 Arrest Recalled

Mr. Mermelstein, who filed the suit, is a 55-year-old native of the Carpathian region of Czechoslovakia. He submitted a long, frequently poignant affidavit relating that he was arrested in the spring of 1944 with his parents, two sisters and a brother, and that a month later, after three days and two nights of travel in a railroad boxcar, they were delivered by SS troops to the Auschwitz-Birkenau camp in Poland.