WASHINGTON (AP) _ A federal investigation into the 1985 crash of a Midwest Express DC-9 at Milwaukee concludes that a crew failure to diagnose and respond properly to an engine failure caused the plane to stall.

The National Transportation Safety Board in a final report Tuesday rejected arguments by the airline that both engines actually failed almost at the same time, resulting in an aircraft that could no longer fly.

All 31 people aboard the jetliner were killed in the Sept. 6, 1985, accident which occurred seconds after the plane lifted off from Milwaukee's Mitchell Field. The aircraft was airborne less than half a minute and reached only 700 feet.

The NTSB concluded that the ''improper use of flight controls'' in response to the breakup of the right engine was the probable cause of the crash. The board said the plane should have been kept aloft despite the failure of one engine.

Midwest Express had claimed the left engine of the DC-9 stalled seconds after the right engine broke apart, causing the pilot to lose control of the aircraft.

The NTSB investigation concluded, however, that a reduction of power in the left engine was likely the result of the pilot pulling back the throttle slightly and that the actual stall of the left engine came later, after the plane had begun to roll, causing insufficient air flow through the left engine. By that time, the plane already was out of control, the investigators said.

By a 3-1 vote, the safety board said the aircraft stalled because the flight crew did not diagnose the right-engine failure and responded incorrectly in attempting to compensate for the loss of power on one side.

The pilot initially responded correctly by briefly applying left rudder to compensate for the effects of the engine failure on the right. But then he applied right rudder which served to aggravate the aircraft's veering to the right until it went into a severe roll and crashed, the investigators said.

Airline representatives immediately challenged the conclusion, arguing that the pilots reacted properly and were battling problems in both engines.

''They (the NTSB) took a very complicated accident and oversimplified it with an easy answer of pilot error,'' complained Tim Hocksema, president of Midwest Express, after he sat through a day-long board meeting in which the final language of the accident report was debated.

Hocksema said Danny Martin, 31, the pilot of the DC-9, and his co-pilot, William Weiss, ''did everything possible to save the aircraft.''

While all four safety board members generally agreed that pilot actions were the key factor in the aircraft crashing, they disagreed how much weight should be given the right engine failure in determining the cause of the accident.

Board member John Lauber argued that ''what led to the accident was the handling of the aircraft following the catastrophic (engine failure) event'' and not the engine breakup itself. The DC-9 is designed to fly, even take off, on one engine.

But Jim Burnett, the board's chairman, argued that the engine failure, and the failure to detect cracking in the engine long before the accident, should be given equal weight in the board's findings.

Burnett cast the lone vote against the probable cause as it was written.

But the board, including Burnett, agreed that apparent confusion and ''a lack of coordination in response to an emergency'' were key factors in the accident.