"This is a terrible human tragedy," Reagan said in a written statement issued from the presidential retreat at Camp David, Md.
Reagan extended "our sympathy and condolences" over the loss of life, but maintained that the Vincennes was "firing to protect itself against possible attack."
The Iranian government charged that the plane was shot down intentionally and vowed revenge.
The United States put its embassies and military bases around the world on a higher state of alert after the incident. Security at their Fourth of July parties was being reinforced.
The Vincennes is one of more than a dozen U.S. warships in the Persian Gulf under the administration's policy of escorting 11 Kuwaiti tankers flying the U.S. flag to protect them from Iranian attack.
Adm. William J. Crowe Jr., chairman of the Joint Chiefs of Staff, said Capt. William C. Rogers 3d, the commanding officer of the Vincennes, acted properly after his ship tracked the plane as it drew closer to the ship at an increasing speed and decreasing altitude.
Crowe said the aircraft ignored seven radio warnings over military and civilian channels to vary its course or to identify itself.
"There were electronic indications on Vincennes that led it to believe that the aircraft was an F-14," Crowe told reporters at an early afternoon briefing, about 11 hours after the plane was destroyed.
The Pentagon reported this sequence of events in the gulf yesterday morning:
* At 10:10 a.m. local time, a helicopter from the Vincennes was shot at by Iranian speedboats as the Vincennes and the U.S. frigate Elmer Montgomery headed south through the Strait of Hormuz. The helicopter was not hit.
* The Vincennes and the Montgomery fired at three Iranian Boghammer speedboats beginning at 10:42 a.m. local time (2:42 a.m. in Philadelphia). Two of the boats were sunk, and the third was damaged.
* Five minutes into the skirmish, at 10:47, the Vincennes detected an aircraft that had taken off from Bandar Abbas, a military and civilian airport on the Iranian mainland just north of the strait.
* After issuing warnings and receiving no response from the plane, the crew of the Vincennes declared the aircraft to be "hostile" at 10:51, because the plane was headed directly for the Vincennes at more than 500 m.p.h. Three minutes later, the Vincennes fired two missiles, and one destroyed the jetliner.
"The people operating the radar had about four minutes from the time they picked this target up until it was declared hostile," Crowe said.
A few minutes after the plane went down, U.S. forces detected an Iranian F- 4 fighter in the region, but it did not approach the strait, Crowe said. No U.S. planes were in the area, Pentagon officials said.
The 9,600-ton Vincennes, the first of the Navy's billion-dollar Aegis cruisers to be assigned to gulf duty, has been on patrol in the southern gulf for the last month. Its arsenal includes SM-2 Standard missiles, with a range of up to 35 miles, that were fired at the Iranian airliner. Its Aegis defensive system is designed to detect and target underwater, surface and air threats to Navy ships.
Haze limited visibility in the strait to less than five miles at the time, Crowe said.
But he defended the shooting, saying the plane failed to respond to the radio calls, was flying outside commercial air lanes, and was on a threatening low-level, high-speed approach toward the Navy ship.
Before firing, the ship also cross-checked a log of commercial flights and found no regularly scheduled flight out of Bandar Abbas, Pentagon officials said. The flight is listed on commercial air schedules available in the Middle East.
When it was shot down, the jetliner was about "four to five miles" outside the normal route flown by commercial airlines and about 8,000 feet high, Crowe said.
"The reason that these accidents are avoided mainly is that civilian airliners fly at very high altitudes, and particularly because of the area," he said, referring to the war zone in the gulf region. "This one did not."
"The commanding officer had a very heavy obligation to protect his ships, his people," the nation's top military officer said. Ships of the Vincennes class carry a crew of 395.
"When the aircraft was about nine miles away, the Vincennes fired two Standard surface-to-air missiles, at least one of which hit at an approximate range of six miles," Crowe said.
"We do have some eyewitness reports that saw the vague shape of the aircraft when the missile hit, and it looked like it had disintegrated."
The aircraft's debris fell into Iranian territorial waters near Henqam Island at the southern end of the gulf.
The jet, Iran Air Flight 655, was on a routine 150-mile flight between Iran's coastal city of Bandar Abbas and Dubai, across the gulf in the United Arab Emirates, the Islamic Republic News Agency, Iran's official press agency, reported.
"One of the most difficult problems is - from a radar blip, particularly
from a head-on target - to identify the type of aircraft," Crowe said. Other Navy officials said the Navy only gets foolproof identifications if the pilot or electronic squawk box of the airplane under surveillance identifies itself, or through visual means.
Crowe said the Vincennes, using "some other electronic information, which is classifed, and I'm not willing to discuss," believed the plane was an F- 14. Most civilian aircraft emit electronic signals identifying themselves and monitor specific civilian radio frequencies to respond to radio challenges.
"I don't understand the responsibility of a country that, while it is attacking other ships, making a war zone out of a certain area of the ocean and then going ahead and flies a commercial airliner over that part of the ocean at the time that attacks and hostilities are under way," he said.
Both Reagan and Crowe promised a full Defense Department investigation into the jetliner's destruction.
"When the aircraft failed to heed repeated warnings, the Vincennes followed standing orders and widely publicized procedures, firing to protect itself against possible attack," Reagan said in his statement.
Presidential spokesman Marlin Fitzwater said Reagan, who was at Camp David for the holiday weekend, received a telephone call at 4:52 yesterday morning
from national security adviser Colin L. Powell, who told him that U.S. forces believed they had shot down an Iranian F-14 fighter-bomber.
He received an update in writing at 8:11 a.m. that noted the Iranian claim that a civilian jetliner had been downed, Fitzwater said.
At 9:50 a.m., Powell's deputy, John Negroponte, told Reagan that the Iranian allegations might be correct. Four hours later, Crowe confirmed that suspicion when he briefed reporters.
Crowe said several times that Rogers, the Vincennes' captain, had done the right thing. He "acted with good judgment in a very trying period of time and under very trying circumstances," he said. "Not only was he following this aircraft . . . he was engaged on the surface with Iranian units at the time."
U.S. Navy forces in the gulf have been on a hair trigger since May 1987, when 37 U.S. sailors were killed in an accidental attack on the U.S. frigate Stark by an Iraqi fighter. There also have been U.S. intelligence reports that the Iranians have installed several Silkworm missiles, packing 1,000-pound warheads, along their gulf coast.
The Navy also had noted increased activity by Iranian F-14s in the southern gulf region, Crowe said.
On Saturday, the Montgomery came to the aid of a Danish supertanker being attacked by three Iranian gunboats in the southern gulf. The Montgomery fired a warning shot, and the gunboats sped away.
The Iranian attack on the Danish ship came after Iraqi planes hit two Iranian tankers with missiles, ending a lull of more than two weeks in the gulf tanker war.
"A decision was made early in the commitment to give our commanders sufficient latitude to protect their people and equipment when hostile intent was manifested," Crowe said. "They do not have to be shot at before responding."
Those rules of engagement have not been changed because of the incident yesterday, he said.
Crowe also said that last fall, the United States alerted all civil airlines flying in the Persian Gulf region that the Navy's heightened alert made it imperative for airliners to respond to U.S. warnings.
Crowe added that U.S. forces in the region had been warned of unspecified ''indications" that Iranians were planning to "carry out attacks against our forces over the July 4th holiday period."
Yesterday's confrontation was the first major military clash between the United States and Iran since the U.S. Navy destroyed two Iranian oil platforms and sank or damaged four Iranian ships in April. That action occurred after the U.S. frigate Samuel B. Roberts was damaged after striking a mine believed to have been planted in the gulf by Iran.
In gulf incidents in 1987, the Kuwaiti tanker Bridgeton was damaged by a mine while under U.S. Navy escort, and two other tankers were hit by Iranian Silkworm missiles.
Crowe hinted that the incident yesterday would not have occurred had the Navy been in wide-open ocean waters where there is more room to maneuver and more time to make decisions.
"This has been one of the major difficulties in the Persian Gulf from the outset - we're fighting in a lake," he said. "And when flights come feet wet" - meaning over water - "very few seconds - no matter what" are available to make life-and-death decisions.
THE DOWNING OF IRAN AIR FLIGHT 655
10:10 a.m. local time - An attack helicopter from the USS Vincennes is fired on by three Iranian patrol boats.
10:42 a.m. local time - The Vincennes and the USS Montgomery fire on the Iranian patrol boats, sinking two and damaging the other.
10:47 a.m. local time - Iran Air Flight 655 takes off from Bandar Abbas. The Vincennes picks it up on radar.
10:49 a.m. local time - The Vincennes begins sending messages, warning Flight 655 to identify itself and change course. There is no response and Flight 655 stays on a course taking it towards the Vincennes.
10:51 a.m. local time - The Vincennes takes note of the closing range of Flight 655 and declares it "hostile."
10:54 a.m. local time - The Vincennes fires two Standard surface-to-air missiles at Flight 655, now nine miles away.
10:55 a.m. local time - At least one missile strikes Flight 655 as it flies over Henqan Island six miles from the Vincennes. Flight 655 explodes and crashes into the Strait of Hormuz.