Decorating challenge: lighting up a dark basement apartment.OOD

NO one would have guessed that a small, dark basement apartment in Greenwich Village could win a major design award this year. Yet young interior designer Daniel Sterling the other day accepted a check for $2,500 as the residential category winner in the annual S. M. Hexter ''Interiors of the Year'' award program. With considerable imagination, he transformed the unlikely space into a home for himself, which the award jury cited for its ''pleasant, airy ambiance.''

Stanley Abercrombie, editor of Interior Design magazine and foreman of the jury, said the six professional jurors commended Mr. Sterling's entry for its ''clever solution of space problems and interplay of materials and lighting.''

Mr. Sterling, who heads his own design firm, said during an interview here that he purchased his apartment in an old renovated meat-packing building because it was a ''good co-op buy'' on a quiet street in the neighborhood he likes best in all of New York City. ''Greenwich Village,'' he says, ''has a sense of community and a friendly feeling. I come from a small town in upstate New York, and it is important to me to be able to walk around and speak to people I know.''

He had to compensate with clever decorating for the fact that the apartment has no view and ''unaesthetic'' high windows through which only the scurrying feet and occasional peering faces of passers-by are visible.

Two secrets of his success, he says, are lots of built-in drama and lots of built-in storage. Being socially active and athletic, he obviously needs places to entertain and to put his gear - his skis, fishing rods, bicycle, camping equipment, exercise weights, stereo equipment, books, records, wardrobe, and shoes.

Although the main room of his studio is but 10 by 15 feet, there is a long hall, kitchen, and bath. He angled the hall and maneuvered all other space to carve out eight additional floor-to-ceiling closets in which all his possessions can be neatly stashed away. He made use of every inch, from the floor to the 15 -foot ceiling and bought a decorative ladder to keep handy for the upper reaches.

Mr. Sterling's training in design at Syracuse and Columbia Universities provided the know-how behind his approach. He needs lots of storage room, he explains, because he prefers ''the uncluttered minimalist look in interior design, and that does not include a lot of stuff lying around in plain sight. Even my air conditioner and stereo speakers are camouflaged behind the wooden grille.''

As for the drama, there is a control panel for all the low-voltage recessed-cove lighting in the apartment and pin spot lights in the ceiling to highlight the fireplace and the African sculptures. He can also light the grid-patterned grilles from behind or in front to change the mood in the room. Individual pharmacy lamps provide reading light. ''Lighting is extremely important in such an apartment,'' he says, ''and warrants a larger investment of money to get exactly the right effects.''

He has covered the window wall with a handsome wood grille that lets in light and enables him to see out but does not encourage others to look in.

In front of the grille Mr. Sterling has placed a laminated silk shade that can be electronically lowered in front of the grate to give the impression of a fabric wall and to create yet another mood. For different effects he can also substitute several different silk shades. For seasonal change he alternates four different sets of slipcovers for the modular seating in the room.

''I would advise anyone decorating such a small room to use a palette of neutral colors,'' he says. ''I used an off-white wool Berber carpet, carmel-colored walls, natural wood tones, and a dark ceiling to cut the height of the room. The sharpest color note in the room is the Indian silk on the sofa in wide stripes of magenta, cerise, and burnt orange.''

The fireplace wall is covered with a softly luminous brushed metallic laminate. The coffee table on casters can be moved around the room. It can also be raised to dining height and easily accommodates eight dinner guests.

The scale of the furniture is in keeping with the size of the room - ''nothing too big, too small, or too much,'' says the designer. ''The main thing ,'' Mr. Sterling concludes, ''is that I have made the apartment workable for my own kind of living. For all its smallness, I enjoy living in it.''