SAO PAULO, BRAZIL — AFTER years of controversy, the Brazilian government finally bowed to the demands of Indian rights activists and decided Friday to demarcate a homeland for the Yanomami Indian tribe.By setting aside an area exclusively for the Indians' use, the move could permanently end the devastating impact of disease and pollution by miners in the region. And because the nomadic Yanomami are de facto protectors of their habitat, the decision should also help conserve the Amazon rain forest. The 36,000-square-mile area to be demarcated is three times the size of Belgium - and equal to what anthropologists recommended for the Yanomami in a 1988 government study. There are about 9,000 Yanomami living in Brazil and an equal number over the border in Venezuela. "We have been waiting for this for 13 years and it was something very gratifying ... because in an unexpected way it ended much better than we thought," says Claudia Andujar, coordinator of the nonprofit Commission for the Creation of the Yanomami Park (CCPY). "It's a first step towards demonstrating that Brazil is ready to change, to pay a debt of 500 years of persecution and death." The largest indigenous group in the Americas still living in a primitive state, the Yanomami lived peacefully in the Amazon for thousands of years. But this changed in the late 1980s when gold was found, and thousands of miners came to occupy the Yanomami's traditional homeland. The Indians began to sicken and die because they lacked immunity to white men's diseases and because the mining process polluted local rivers with mercury, killing food fish. In the last five years, about 1,500 Yanomami have died from illness or violence. Brazilian President Fernando Collor de Mello was widely expected to announce the demarcation Oct. 29, but for unexplained reasons put off the announcement. Politicians and businessmen from the Amazon state of Roraima opposed the demarcation, which would carve a substantial amount of territory from the state. In addition, the Brazilian military expressed concern that the Yanomami might create their own nation-state in the future. To address such concerns, the president also announced Friday that an Amazon development policy will be drafted by mid-1992. The policy is to include ecological and economic zoning and tax breaks, and will emphasize sustainable development and scientific research and development. In order for any mining activity to take place in the Yanomami homeland, both Brazil's Congress and the Yanomami must approve. But current law does not prevent the military from entering or occupying parts of the homeland to car ry out normal duties. Mr. Collor began clearing the way for his decision last July, when he replaced the president of the National Indian Foundation (Funai) with longtime Indian rights champion Sydney Possuelo. Mr. Possuelo has removed thousands of illegal gold miners from Yanomami territory, and Funai has set up 14 permanent observation posts to protect the Indians from new invasions. Now, the demarcation must be carried out, a difficult task in the remote and isolated area. And health is still a concern. "The problem is not over with," says Marcelo Sampaio, a Sao Paulo doctor who has just returned from working with the Yanomami. "It's not infrequent to find 50 percent of a village contaminated with malaria, and an accentuated level of malnutrition." He adds that the Indians report many miners are still in the area. The demarcation decision indicates the Brazilian government's sensitivity to foreign public opinion, environmental and Indian rights activists say. "We have to take advantage of this factor as much as possible before [the United Nations Conference on Environmental and Development in June 1992], to get things done," says Federal Deputy Fabio Feldmann. He is concerned that constitutional provisions favoring indigenous groups and the environment could be changed in a congressional review scheduled for 1993. The reaction of the Yanomami to the demarcation decision is unknown. "The great majority [of Yanomami] don't know they live in Brazil. They're really people who are in their first contact [with the world]," says Ms. Andujar. "They don't even know their neighbors, the Macuxi tribe." CCPY will now help to educate the Yanomami about the world they live in and their place in it, she adds, and will also raise funds for the demarcation process.