MINNEAPOLIS (AP) _ A suburban community is toasting the upcoming visit of Mikhail S. Gorbachev by slashing the price of Soviet vodka - a libation banned by another municipality when East-West relations weren't so merry.

''We felt it was an opportunity to extend a greeting to the Soviet president,'' said Bob Erickson, city administrator of Lakeville.

Erickson said the sale of Stolichnaya vodka by the three municipal liquor stores at 5 percent above the wholesale price - discounted from $14.99 a liter to $11.65 - was designed to counteract a now defunct advertising campaign for Minnesota-made Karkov vodka.

Before the Karkov campaign was dropped last week, billboards featured the Soviet president as a pitchman beside the caption ''The Party's Over,'' a reference to the Communist Party's problems.

The billboards were up before Gorbachev's visit to Minnesota was announced. In their place is a message in Russian toasting his health.

Lakeville has advertised its Stolichnaya promotion under the slogan ''The Party's Just Beginning,'' said Judy Perron, Lakeville liquor manager.

''She (Perron) found the Karkov billboards somewhat offensive,'' Erickson said. ''She felt that as a liquor retailer we wanted to counteract that.''

The vodka promotion at the municipal liquor stores began Monday and will continue through Saturday, Perron said.

But the drinks haven't always flowed this freely.

The small town of Hutchinson, for example, banned the drink from its municipal liquor store in 1983 following the downing of a South Korean jetliner by a Soviet fighter pilot. The ban was lifted in December in recognition of a thaw in the cold war.