Liberace, whose glitzy costumes, giant candelabra and extravagant showmanship made him almost as famous as his piano playing, died yesterday at his home in Palm Springs, Calif. He was 67 years old. His spokesman in New York, Denise Collier, said the cause of death was cardiac arrest due to congestive heart failure brought on by subacute encephalopathy. Encephalopathy is a degenerative disease of the brain. A contributing cause was aplastic anemia, Ms. Collier said.

Throughout Liberace's long and lucrative career - his income averaged $5 million a year for more than 25 years - it was hard to make fun of him because he seemed to have so much fun making fun of himself. With his megawatt smile, his furry, feathery costumes, rhinestones as big as the Ritz, piano-shaped rings and a unique blend of Beethoven and the ''Beer Barrel Polka,'' Liberace charmed millions with a flashiness that was almost too much to be believed.

But a Liberace performance was not all baubles, bangles and bright beads. Unbowed by years of critical scorn and 175-pound fur capes, he worked hard. During a typical show he was on the stage for more than two hours with only short breaks for costume changes.

His audiences loved what he called ''Reader's Digest versions'' of familiar melodies. Liberace whipped through Chopin's ''Minute Waltz'' in 37 seconds and Tchaikovsky's Piano Concerto No. 1, which usually fills both sides of a long-playing record, in four minutes. His secret, he said, was ''cutting out the dull parts.''

Because his health was deteriorating, Liberace last month canceled all performances scheduled for 1987. Sequins and Candelabra

Liberace realized early that clothes make the man. When he played the Hollywood Bowl in 1952, he put on a set of white tails ''so they could see me in the back row.'' He added a gold lame jacket in Las Vegas. ''Wow!'' he said later. ''They crawled out of the woodwork when they saw it. What started as a gag became a trademark.''

Soon Elvis Presley was wearing a suit of gold lame. Soon Elvis impersonators were wearing suits of gold lame.

Then Liberace dared to be really different. He got himself a conservative haircut, mothballed his costumes and switched to traditional two- and three-piece suits. His concert bookings and his income dropped off dramatically, but rebounded when he reinstated the sequins and the candelabra.

Liberace's wardrobe eventually filled rack after rack in his mansions and included a silvery plum lame cape with an eight-foot train of pink feathers, a $300,000 Norwegian blue-fox cape with a 16-foot train, and a sequined drum-major's uniform, complete with hot pants. Exaggeration as a Method

''Through exaggeration, I could get my point across much more easily,'' he wrote in an autobiographical picture book, ''The Wonderful Private World of Liberace,'' published last year. ''Don't wear one ring, wear five or six. People ask how I can play with all those rings, and I reply, 'Very well, thank you.' ''

Advances in technology enhanced his flamboyance. After American astronauts walked on the moon in 1969, Liberace said he wanted to appear in ''the suit of tomorrow'' - a ''see-through, plastic outfit'' - and play a legless see-through piano ''suspended in air.''

Neither age nor scandal hurt his popularity. In 1982, Scott Thorson, who had been his chauffeur, bodyguard and companion for five years, filed a $113 million lawsuit in Los Angeles Superior Court, asserting that the pianist had broken financial promises to him. The suit was settled last month for $95,000.

In Liberace's final days, he was again a subject of controversy. The publisher of The Las Vegas Sun, Hank Greenspun, wrote a front-page column last month in which he asserted that a well-known entertainer was dying of AIDS. The column said The Sun would identify the entertainer if he did not enter a hospital for treatment.

Several days later, the newspaper ran a front-page story that said Liberace had AIDS. After the story appeared, Liberace was taken to Eisenhower Medical Center in Palm Springs. He was released last week. Liberace's managers were quoted as denying that the performer had acquired immune deficiency syndrome. Mr. Greenspun, who said he had known Liberace for 40 years, said yesterday that he had medical records, laboratory reports and other documentation pertaining to Liberace and that he stood by the story. Walter Busterkeys

Wladziu Valentino Liberace was born in West Allis, Wis., on May 16, 1919. He stopped using his first and middle names early in his career. ''Paderewski didn't achieve fame until he dropped his first name,'' he said, referring to the Polish pianist, whom he idolized.

Liberace, whose friends called him Lee, was the son of a specialty grocer who had played the French horn in John Philip Sousa's concert band. Liberace's mother played the piano, and Liberace began piano lessons when he was 4 years old.

He spent his teen-age years playing piano in silent-movie houses. Under the name Walter Busterkeys, he played honky-tonk tunes in a cocktail lounge in Wausau, Wis., when he was 14.

But he also studied the standard classical piano repertory. He appeared with the Chicago Symphony in 1936 under Frederick Stock, playing Liszt's Concerto No. 1.

Three years later, Liberace stumbled onto the musical formula that made him famous.

It happened at a recital in La Crosse, Wis. The audience yelled for Liberace to play the popular novelty song ''Three Little Fishies'' as an encore, and he did. This break with concert tradition ''really shook 'em up,'' Liberace said later, and he realized he was on the road to riches, rhinestones and Rolls-Royces.

Liberace was television's first matinee idol, with a syndicated show in the 1950's that was carried by more stations than ''I Love Lucy.'' On the stage, he remained a hot ticket for years. Liberace returned to Radio City last November and sold out 18 concerts in 21 days, grossing $2.5 million.

Liberace had many talents that the public never knew about. He liked to cook and grow orchids. He once worked up such enthusiasm for the Minneapolis Lakers basketball team that he hand-painted ties for the players. He was also an inventor, with a patent on a disappearing toilet.

In 1975, he opened his Hollywood mansion to public tours as a museum to himself, promising to donate each visitor's admission fee to the Liberace Foundation for the Creative and Performing Arts, which helps young performers. After a zoning dispute, the museum moved to Las Vegas.

His home, also in Las Vegas, began as an unpretentious bungalow and grew - at an estimated cost of $4 million - into a block-long palace. As the pianist lay on his huge white bed, he could stare at a $50,000 imitation of the Sistine Chapel ceiling. In the center, surrounded by cherubs, is Liberace's smiling face.

He is survived by a sister, Angelina Farrell, of Los Angeles and Las Vegas.

Walter Liberace