Frobisher Bay in the eastern part of Arctic Canada does not look much like a capital city. Buried in snow for most of the year, the town has no parks, monuments, or prestigious buildings. Street traffic consists of snowmobiles rather than cars; the skyline is dominated by trailers and prefabricated housing.
Nevertheless, this community of 3,000 is regarded as the most likely choice as seat of government of ''Nunavut,'' a new territory to be created in the eastern part of Canada's Northwest Territories where the 25,000 Eskimos (Inuit) make up 80 percent of the population.
Nunavut - which means ''our land'' in the Inuit language, Inuktitut - still is only a dream for the area's people, most of whom are hunters and trappers.
In their efforts to create a homeland north of the tree line, the Inuit are up against the Quebec-induced Canadian fear of separatism and a national government that is not eager to reduce its influence in this resource-rich, strategically important region.
Nevertheless, progress is being made. A major step was taken recently when the Canadian minister of Indian and northern affairs, John Munro, announced that his government, on certain conditions, is ''prepared to accept in principle'' the subdivision of the Northwest Territories' 1.3 million square miles.
''Until today it was all very theoretical. We didn't know whether the government would allow Nunavut to be created. Well, now we know they will,'' an Inuit spokesman said when the government's attitude was announced.
Perhaps the strongest reason for establishing Nunavut is the area's remoteness, geographically and figuratively, from Yellowknife, the Northwest Territories' capital. The Inuit say the province, which spans four time zones and includes one-third of Canada's land mass, is too large and diverse to be administered effectively from one center.
The Inuit also point to cultural differences between themselves and the Indians and whites who live in the western part of the territory. Peter Jull, a constitutional adviser to the Inuit Tapirisat (''brotherhood'') of Canada (ITC), and a former adviser to federal and provincial Cabinets, says, ''The priority is simply getting a territorial government structure that works, is meeting the needs of the people - and is dealing with them in their own language and made up of their own people.''
Mr. Jull says, ''The Inuit do not want some form of exclusive ethnic government. On the contrary, ITC scrupulously developed the Nunavut proposal within Canadian political conventions.
''Just as Nova Scotia has a majority of Anglo-Celtic inhabitants, Inuit would dominate in Nunavut. Anybody who has worked with Inuit knows very well that they are open and welcoming people who are not going to legislate against Beethoven.''
The ITC regards the establishment of a Nunavut territory as only an intermediary step toward formation of a Nunavut province. It argues that only provincehood would ensure the Inuit the political rights of other Canadians. A territorial government is merely advisory, with no jurisdiction such questions as land and resource management.
''While southern politicians eagerly discuss northern resource development schemes,'' says Mr. Jull, ''Inuit and other northerners have no say whatsoever. If they are to have full Canadian citizenship, then Nunavut obviously must become a province.
''Successive prime ministers . . . have applied their efforts to equality of the races and the extension of economic and political opportunities to the less-fortunate nations. The plight of Canada's own minority non-European peoples surely deserves as much consideration.''
But at the press conference, Mr. Munro said he does not see provincial status as ''a realistic objective in the foreseeable future.''
He explained that the small population base, the vast area, the undeveloped and narrowly based economy, and the need of the federal government to protect Canada's national interests ''all militate against serious consideration of provincial status'' at this time.
Mr. Munro also announced that the division of the Northwest Territories and, consequently, the creation of a Nunavut territory depend on a number of conditions. According to a high-ranking government official, it will take ''at least three years'' to fulfill them.
One condition is that residents of the Northwest Territories reach a consensus on the location of the boundary. The ITC favors division along the timberline, a fairly distinct line running from the icy Beaufort Sea in the northwest to the shore of Hudson Bay in the southeast.
Indians and whites in the western part of the territory suggest division along a northward extension of the provincial boundary between Manitoba and Saskatchewan.
Other conditions include settlement of native land claims; agreement on the distribution of powers among local, regional, and territorial levels of government; and consensus on the location of future administrative centers.