Former Oriole pitcher Ken Dixon, whose professional baseball career was sidetracked by drug problems in 1989, was arrested near City Hall early today and charged with misdemeanor possession of cocaine, city police said.

Police said Dixon, 30, of the first block of Clinton Hill Court in Middle River, was arrested after police spotted what they thought was an illegal drug transaction on the corner of Fayette and Holliday streets about 1:30 a.m.

Police apprehended one man and said he had a glassine bag of suspected cocaine on him.

Police spokesman Dennis Hill identified the man as Dixon, who ** pitched with the Orioles from 1984 to 1987 before being traded to Seattle and released. The Orioles signed him again and released him in 1989 from their Double A team in Hagerstown, citing his failure to comply with the minor-league drug prevention and testing program.

Dixon was released today on his own recognizance.