RIVERHEAD, N.Y. (AP) _ The nation's toughest newspaper recycling law has been approved in Suffolk County on Long Island, where all major papers will be required to use 40 percent recycled newsprint in their editions by the end of 1996.

The measure, which was approved Tuesday by a 12 to 6 vote in the county Legislature, was criticized by a group representing 64 daily papers in the state. The supporters of the bill would be able to override a veto by County Executive Patrick Halpin.

''Any use of recycled paper should be market driven,'' said John Kutzer, executive director of the New York Newspaper Publishers Association. ''We feel local government is perhaps going overboard with these requirements.''

The law would apply to all daily and weekly newspapers printed, sold, or distributed in Suffolk County, provided their Suffolk circulation is 20,000 or more a week. Advertising circulars are included if they meet the same circulation requirement.

The bill would require that newspapers be printed on stock containing at least 40 percent recycled paper by Dec. 31, 1996. Compliance would be phased in in yearly steps.

Papers which did not comply would face a $500 fine each day.

Legislator Maxine Postal, D-Amityville, sponsored the bill, saying the measure would ease the pressure on Long Island landfills and incinerators.

''If the country does not move to resolve this problem, our most famous product next to the F-14 is going to be garbage,'' said Ms. Postal.

Publishers complained there is just a single plant in the Northeast which supplies recycled paper, and the next one is not due to open until 1993.

But Postal said paper manufacturers would retool to provide adequate supplies of recycled paper once publishers were willing to commit to long-term contracts.

The publisher of Newsday, the largest circulation daily on Long Island, was opposed to the Suffolk plan and plans to challenge the law in court, said spokesman Sam Ruinsky. Newsday presently uses 17 percent recycled paper for printing.

William K. Adler, manager of corporate relations for The New York Times, cited a voluntary agreement approved by the publishers association in which they agreed to gradually increase the use of recycled paper. That plan set a goal of 40 percent by the year 2000.

''Since the state has initiated a coordinated program, attempts by individual counties to legislate their own timetables for recycled newsprint are counterproductive,'' said Adler.

The Times is currently using 8 percent recycled fiber, he said.