Mr Obama's campaign team apologised for the comments, which have given a boost to the former first lady in the bitter fight for the Democratic nomination for the White House.
Samantha Power, the Pulitzer Prize-winning author who made the remark, said: "With deep regret, I am resigning from my role as an adviser to the Obama campaign. I made inexcusable remarks that are at marked variance from my oft-stated admiration for Senator Clinton and from the spirit, tenor and purpose of the Obama campaign. And I extend my deepest apologies to Senator Clinton, Senator Obama and the remarkable team I have worked with over these long 14 months."
Earlier in the day, she had apologised after the Scotsman interview was picked up by American news networks and became the top item on websites, including the Drudge Report.
Her comment earned Ms Power wall-to-wall coverage in the US media – "Monster Bash" was the front-page headline in the New York Daily News, which labelled her remark "slime-time politics".
Mr Obama's spokesman, Bill Burton, said the remarks were not in keeping with the senator's views: "Senator Obama decries such characterisations, which have no place in this campaign."
Ms Power gave the interview to The Scotsman in London during a tour of the UK and Ireland to promote her book, Chasing the Flame: Sergio Vieira de Mello and the Fight to Save the World.
She said her remark was "a lapse of judgment" that came after an extended period without sleep and a transatlantic flight. And she stressed that, "in the cold light of day", her opinions of Hillary Clinton have not changed – Mrs Clinton was "a role model for me and for so many women in public service".
Campaigning in Mississippi, Mrs Clinton welcomed the apology, but added: "I think that it is important to look at what she and his other advisers say behind closed doors, particularly when they are talking to foreign governments and foreign press. It raises disturbing questions about what the real planning and policy positions in the Obama campaign happen to be." She was referring to comments Ms Power made a few months ago that discredited any Iraq exit plan because of the likelihood of having to change that plan.
During the Scotsman interview, in the Waldorf Hilton, Ms Power had taken a phone call from the Obama campaign's economic adviser, before coming back and volunteering what the call had been about. "We f***** up in Ohio," she said, in reference to remarks about the North America Free Trade Agreement (Nafta). She said the state had been "obsessed" with the issue and she feared the Clinton camp would seize on it.
"In Ohio, they are obsessed, and Hillary is going to town on it because she knows Ohio's the only place they can win," Ms Power said, before the former first lady's team victory in the state was announced.
"She is a monster too – that is off the record – she is stooping to anything."
Ms Power agreed that Mrs Clinton had looked desperate in recent interviews, adding, in reference to international audiences: "You just look at her and think, ergh. But if you are poor and she is telling you that Obama is going to take your job away, maybe it will be more effective. The amount of deceit she has put forward is really unattractive."
Mr Obama had promised voters he would not engage in the politics of personal destruction.
The controversy underscores the increasing hostility between the rival Democrat camps, and it follows
a series of gaffes, since which Mr Obama's once assured campaign has begun to falter.
Last weekend, his economic adviser reportedly told Canadian officials that Mr Obama's comments on renegotiating Nafta were only for show.
Then earlier this week, Susan Rice, a foreign policy adviser, was asked by a TV station about the candidates' ability to handle a crisis phone call at 3am in the White House. "Neither of them is ready to take that call," she said.
Mrs Clinton says the comments raise questions about the professionalism of the Obama campaign.
Ms Power's remarks have confirmed, for many, that the contest is getting poisonous. "It (the Power quote] has become a story because it is indicative of the growing bitterness of the Democratic race," said Philip Klein, of the American Spectator. "The gloves are coming off."
Yesterday, Mrs Clinton and Mr Obama were preparing for today's Wyoming primary.
DEMOCRATS' BATTLE GETS PERSONAL
WITH George Bush, the president, suffering low approval ratings and the economy on the brink of recession, the Democrats were expected to have a good chance of victory in November's election.
But while the Republicans have chosen John McCain, Democratic front-runners Hillary Clinton and Barack Obama are still fighting it out to represent their party.
The debate has been more personalised than either had hoped. And the fight is about to get a lot dirtier: just ten states are left to declare, and Mrs Clinton believes she gains ground when attacks on Mr Obama hit home.
Already in this campaign, anonymous e-mails have claimed that Mrs Clinton is having a lesbian affair with an aide, while flyers were placed on cars claiming that Mr Obama was a Muslim extremist (he is a Christian).
Mrs Clinton also questioned his links to a Chicago businessman, Tony Rezko, who has been accused of corruption.
For Mr Obama's part, he has sought to portray the former first lady as weak for standing by her husband despite his infidelities, and reminded voters of her initial backing for the Iraq war.
Commenting has been suspended due to repeated abuse of our terms and conditions