Republican vice presidential nominee Sarah Palin accused Democratic candidate Barack Obama of "palling around with terrorists," marking a shift to a nastier tone in the White House race.

The remark was dismissed by Obama as "gutter politics" but appeared to reflect an effort by Sen. John McCain's campaign to target Obama's judgment as the Illinois senator solidifies his national lead and gains an edge in vital battleground states a month before the Nov. 4 election.

It came shortly after McCain's campaign called Obama a liar and just days after both candidates urged Congress to set aside partisan politics to pass a $700 billion financial rescue package in a bid to revive credit markets.

"There is a time when it's necessary to take the gloves off and that time is right now," Palin told thousands of supporters at a rally in a sports arena in Carson, California.

Earlier at a fundraiser in Englewood, Colorado, she departed from her usual speech to question Obama's character.

"Our opponent though is someone who sees America, it seems, as being so imperfect, imperfect enough that he is palling around with terrorists who would target their own country," Palin said of Obama, also calling him an embarrassment.

Palin cited a New York Times story on Saturday that examined Obama's relationship with Bill Ayers, a former member of the Vietnam War-era militant Weather Underground organization who is now a professor at the University of Illinois at Chicago. The Times concluded they were not close.

In Costa Mesa, California, after raising $2 million from donors, the Alaska governor said she and McCain would "start to tell Americans more and more aggressively, I guess, about the choices" in the election.

The tougher tone comes as McCain struggles to move the theme of the election away from the economy, an issue that has helped Obama build leads in key states, including several won by Republicans in the last presidential election in 2004.

Obama spokesman Hari Sevugan said: "Today, the McCain-Palin team took their discredited, dishonorable campaign one desperate step further, announcing that they were going to try 'turning a page on this financial crisis' and launching more personal attacks on Senator Obama."    

"Instead of offering solutions for working Americans and families struggling through a failing economy, they have offered more gutter politics and false attacks," he said in a statement.

Speaking at a fundraiser in Asheville, North Carolina, on Saturday night, Obama made no direct reference to Palin's remarks but told supporters he would continue to run a positive campaign. -Reuters