At issue was a new Lazio TV ad partially financed by the Republican National Committee.

Lazio said the financing method was allowed under an exemption to the soft-money agreement between the Republican congressman and the first lady. Clinton aides denied there was an exemption.

"He is someone who has tried to portray himself as a pious reformer, when in fact ... he has spent his eight years in Congress spending soft money, raising soft money, benefitting from soft money," Clinton campaign spokesman Howard Wolfson said.

Wolfson would not rule out a resumption of TV advertising on behalf of Clinton paid for by the state and national Democratic parties.

But Bill de Blasio, Clinton's campaign manager, said Friday night that no decision had been made on what sort of retaliation, if any, might occur.

The RNC funding for the ad is not soft money, and Lazio appeared exasperated as he addressed the controversy.

"After having fought for this so hard, to have come to this," he said. "We are doing every thing that both sides have agreed to do. That's why I wanted a written agreement, quite frankly."

Lazio later said he planned to return money spent on the ad to the RNC. But his aides said they expected the RNC to simply send the money right back to Lazio for other uses -- potentially freeing up Lazio campaign dollars for TV advertising.

Saying Lazio "got caught with his hands in the till," Wolfson said sending the money back to the RNC "is a clear admission from Rick Lazio that he broke this agreement and broke his word."

The deal reached last month was supposed to end campaign ads paid for by unlimited soft-money donations raised by political parties. Most of that advertising, more than $3 million, had been spent on Clinton's behalf.

Instead, aides said, advertising would be funded by campaign accounts built through individual donations limited to $1,000 each.

The agreement seemed to give Lazio an advantage. Figures released Saturday showed he had raised $10.7 million in hard-money contributions over the previous five weeks to Clinton's $2.6 million. Lazio had $6.1 million left in his hard-money account while Clinton had $2.5 million.

On Monday, Lazio unveiled a new TV ad stressing his sponsorship of legislation that allows disabled people to retain Medicaid benefits when they take jobs. The ad shown to reporters featured the line: "Paid for by Lazio 2000," the name of the congressman's hard-money committee.

But the same ad later appeared on TV with the line: "Paid for by Lazio 2000/The Republican National Committee."

Lazio spokesman Dan McLagan said the differing lines appeared because the ad's initial airing was paid for with Lazio campaign money alone while subsequent airings relied on RNC money.

Under federal rules, national parties are allowed to help finance hard-money ads coordinated with local campaigns. The two campaigns differ on whether that spending was exempt from the agreement.

A statewide poll released Friday from the Quinnipiac University Polling Institute showed Clinton maintaining her lead over Lazio, 50 percent to 43 percent. The telephone poll of 801 likely voters was conducted Monday through Thursday and has a margin of error of plus or minus 3.5 percentage points.