An organized-crime gang that authorities say terrorized an Upper East Side neighborhood through murder, extortion and loan sharking was indicted yesterday under a new antirackeetering law.

For over two years, five key members of the gang engaged in violence, mainly in the vicinity of First Avenue and East 60th Street, the indictment said. Two gang members were accused of luring a rival loan shark to a restaurant in February, shooting him in the head and dumping his body in the East River.

The five men were identified as members and associates of the Gambino crime family, which the F.B.I. has said is the largest, most powerful Mafia group in the country. A Casino on First Avenue

The indictment also accused gang members of demanding $50,000 from a landlord who objected to their use of his building at 1122 First Avenue as a casino, of assaulting a merchant who refused to turn over his store to the gang's leader as an office and of demanding four apartments from another landlord by threatening her and her children.
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The apartments, at 338 East 61st Street, were given to the gang or rented to members for about $100 a month, prosecutors said. They had rented for up to $1,500.

Gang members also forced the owner of a Getty Gas Station at East 60th Street and First Avenue to give them an office and allow them to run a valet parking service at the station, the indictment said.

The Manhattan District Attorney, Robert M. Morgenthau, said the gang raked in about $12 million in illegal profits from gambling, loan sharking and extortion operations in New York City and in Westchester County over the last two years.

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Mr. Morgenthau said the five men were the first organized-crime figures to be indicted under the state's Organized Crime Control Act, which went into effect in 1986 and is similar to the Federal Racketeer-Influenced and Corrupt Organization law.

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The act established a new Class B felony called enterprise corruption. Under it, prosecutors must prove that members of a criminal group collaborated in a pattern of criminal activity and that each defendant committed three or more felony violations over a 10-year period.
Mr. Morgenthau also said the men were part of a crew ''franchised'' by John Gotti, whom Federal and state law-enforcement officials have identified as the boss of the Gambino family.

''The owner of one store was warned that he was dealing with 'Gotti's boys,' '' Mr. Morgenthau said. ''And he was told that his arms and legs would be broken unless he paid $50,000 and ceased interfering with the crew's use of his property for an illegal casino.''

Mr. Morgenthau said investigators had no evidence linking Mr. Gotti to any of the crimes.

The indictment named Ernest Grillo Jr., 32 years old, as the leader of the crew and said he was a ''soldier'' in the Gambino family.

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A statement issued by Mr. Morgenthau's office described Mr. Grillo as the son-in-law of Aniello Dellacroce, who was the underboss or second-in-command of the Gambino family when he died of cancer in December 1985.

Mr. Grillo, who lives in Mr. Dellacroce's former home at 597 West Fingerboard Road in Todt Hill, S.I., was indicted on a murder charge in October.

At his arraignment yesterday in State Supreme Court in Manhattan, Mr. Grillo, wearing a gray leather jacket and carrying a Bible, pleaded not guilty to a superseding Organized Crime Control Act indictment that included the murder accusation. He was ordered held without bail. #11 Others Arrested Also indicted was Seymour Rand, 57, who Mr. Morgenthau said had been the crew's bookkeeper. Mr. Rand was arrested on a loan sharking charge in October, and the District Attorney's office has filed a civil suit against him to seize more than $1 million in cash and more than $1.5 million in real-estate holdings.

Mr. Rand, who lives at 1264 East 83d Street in the Canarsie section of Brooklyn, was accused in court papers of trying to launder or camouflage $12 million for the Gambino family.

He pleaded not guilty at his arraignment yesterday and was released on $200,000 bail.

Also indicted under the act were Michael Scarola, 25, of 401 West 19th Street, who was additionally accused of murder; Nicholas Siciliano, 27, of 2916 St. Theresa Avenue in the Bronx, and Joseph Giordano, 22, who is a fugitive.