BERGEN, West Germany (AP) _ The Bergen town council said Wednesday it had agreed to a compromise plan for honoring Anne Frank, the Bergen-Belsen concentration camp victim whose diaries have inspired millions of people.

Late Tuesday night, the council voted to name a street, a public school or a town square after Miss Frank, and said it would make the decision probably early next month after hearing public comment.

A Social Democratic proposal to name one of the town's main streets after Miss Frank had sparked protests from residents complaining that Bergen had suffered enough over 40 years because of the Nazi death camp located nearby during World War II.

The original proposal was submitted after President Reagan and West German Chancellor Helmut Kohl visited the former site of the camp earlier this year as part of ceremonies marking the 40th anniversary of the end of World War II in Europe.

The proposal would have changed the name of the Belsener Strasse (Belsen Street) after Miss Frank. But it quickly stirred up controversy in this town of 18,000 people about 60 miles south of Hamburg.

The local Stadt-Anzeiger weekly newspaper printed many letters against the proposal.

The newspaper is published by a leading conservative councilman, Guenther Ernest, who said an Anne Frank Street would be ''a daily demonstration' ' against local residents.

Hasso Holz, local chairman of the liberal Free Democratic Party, said: ''The majority of citizens do not want to be confronted with the issue of Bergen-Belsen every day.''

As soon as the original proposal was reported, the campsite monument to Bergen-Belsen victims was defaced with neo-Nazi graffiti.

Miss Frank, a German Jew born in Frankfurt in 1929, wrote a now-famous diary of her life while in hiding with her family in Nazi-occupied Amsterdam, the Netherlands, during World War II. She was captured in 1944 and died in Bergen-Belsen in early 1945 at age 15.

Miss Frank's diary was translated into numerous languages and became known worldwide as a testament to human courage and spirit in the face of oppression.

About 100,000 Jews and Soviet prisoners of war died from 1941 to 1945 at Bergen-Belsen, mainly of hunger or from epidemics.