U.S. Republican vice-presidential candidate Sarah Palin defended her claim that Barack Obama "pals around with terrorists," saying the Democratic presidential nominee's association with a 1960s radical is an issue that is "fair to talk about."

Obama has denounced the radical views and actions of Bill Ayers, a founder of the violent Weather Underground group during the Vietnam War era. On Sunday, Obama dismissed the criticism from the Republican campaign, levelled by Palin, as "smears" meant to distract voters from real problems, such as the troubled economy.

Palin launched the attack Saturday and repeated it Sunday, signalling a new strategy by the presidential campaign of rival John McCain to go after Obama's character.

"The comments are about an association that has been known but hasn't been talked about," Palin said as she boarded her plane in Long Beach, Calif. "I think it's fair to talk about where Barack Obama kicked off his political career, in the guy's living room."

Later, at a fundraiser, Palin elaborated on her attack, claiming one of Obama's advisers had described Obama and Ayers as "friendly."

"In fact, Obama held one of his first meetings hoping to kick off his political career in Bill Ayers's living room," she told the crowd, which had just raised $2.5 million US for the Republican party's McCain-Palin Victory 2008 fund.

At issue is Obama's association with Ayers. Both have served on the same Chicago charity and live near each other in Chicago. Ayers also held a meet-the-candidate event at his home for Obama when Obama first ran for office in the mid-1990s, the event cited by Palin.

In February, Obama strategist David Axelrod told the Politico website: "Bill Ayers lives in his neighbourhood. Their kids attend the same school. They're certainly friendly. They know each other, as anyone whose kids go to school together."

But while Ayers and Obama are acquainted, the charge that they "pal around" seems a stretch of any reading of the public record, as is the suggestion they were associated while Ayers was committing terrorist acts. Obama was eight years old at the time the Weather Underground claimed credit for numerous bombings and was blamed for a pipe bomb that killed a San Francisco policeman.

At a rally in North Carolina, Obama countered that McCain and his campaign "are gambling that he can distract you with smears rather than talk to you about substance." The Democrat described the criticism as "Swiftboat-style attacks on me," a reference to the unsubstantiated allegations about 2004 Democratic nominee John Kerry's decorated military record in Vietnam.

During her stop in California, Palin was asked about an Associated Press analysis that said her charge about Ayers was unsubstantiated, a point made by other news organizations, and about whether the criticism carried a "racially tinged subtext that McCain may come to regret."

"The Associated Press is wrong," Palin said, before arguing that the issue had not been adequately discussed.

In fact, Obama was questioned about Ayers during a prime-time Democratic debate against Sen. Hillary Rodham Clinton prior to April's Pennsylvania primary.

Palin, recharged after last week's debate against Democratic vice-presidential nominee Joe Biden, is animating the party's conservative wing with harsh attacks against Obama. She's courting high-dollar donors for campaign cash. And she is looking to wrestle away women and independent voters from the Democrats.

"The heels are on, the gloves are off," she declares, a threat delivered with a smile.