Under the new military guidelines, which were issued on April 27, peyote use is restricted to enrolled tribal members who are also members of a Native American Church. Peyote may not be brought on military vehicles, planes, vessels or bases. The celebrant must stop using peyote at least 24 hours before returning to active duty. Returning soldiers must notify their commanders that they have taken peyote. In some cases, they may have to notify commanders beforehand. The rules are expected to become final by July.

They will affect only a tiny fraction of the 1.4 million men and women in the armed forces. Of the 9,262 troops who are Indian, as few as 5 percent may be members of the Native American Church.

A legacy of misunderstanding and prejudice by the military may keep peyote use by Indians in the armed services underground for years to come, church members predicted. Last December, church members gathered in the Dayish family's ceremonial hogan here to relate their experiences to military chaplains.

Military veterans recalled hostile commanders who ridiculed their religious practices, denied promotions and blocked career paths that required high security clearances. Navajo parents complained that military recruiters still tell their children that they cannot enlist if they take peyote.

''I have been to many ceremonies for young people going into the service,'' said Harry Walters, a professor of tribal culture and religion at Navajo Community College, in Tsaile, Ariz., ''and because it can be traced, they sit through the prayer service without taking peyote. It would be like a doctor treating you without giving you any medicine.''

Robert Peregoy, a lawyer for the Native American Rights Fund, who helped negotiate the new rules with the Pentagon, said there were widespread misconceptions about the cactus. He said, ''Medical journals show that peyote is not harmful, not habit-forming and does not cause flashbacks.''

Support for the new law also comes from the Drug Enforcement Administration. In an early time of peyote controversy, from 1980 to 1987, the drug agency seized only 19 pounds of peyote compared with 15 million pounds of marijuana.