"I made a mistake and in light of what happened, I have made the personal decision that I will step down as the Co-Chair of the Hillary for President campaign," Bill Shaheen said in a statement.
Clinton campaign spokesman Phil Singer confirmed to CBS News that while in Washington this morning, Clinton apologized - in person - to Obama for Shaheen's comments. Clinton told Obama that the comments were not authorized by her campaign, and that she was upset when she heard them. She also said she did not want personal attacks to be a part of her campaign.
In its response to Shaheen's comments, Obama's campaign said the Clinton people were getting desperate.
Shaheen, an attorney and veteran organizer, told The Washington Post that much of Obama's background is unknown and could be a problem in November 2008 if he is the Democratic nominee. He said Republicans would work hard to discover new aspects of Obama's admittedly spotty youth.
"It'll be, 'When was the last time? Did you ever give drugs to anyone? Did you sell them to anyone?"' said Shaheen, whose wife, Jeanne, is New Hampshire's former governor and is running for the U.S. Senate next year.
"There are so many openings for Republican dirty tricks. It's hard to overcome," Shaheen said.
Shaheen said later he regretted the comments.
"I deeply regret the comments I made today and they were not authorized by the campaign in any way," Bill Shaheen said in an e-mail released by the campaign.
A campaign spokeswoman, Kathleen Strand, earlier had said "Senator Clinton is out every day talking about the issues that matter to the American people. These comments were not authorized or condoned by the campaign in any way."
Obama campaign manager David Plouffe said in response to Shaheen's remarks:
"Hillary Clinton said attacking other Democrats is the fun part of this campaign, and now she's moved from Barack Obama's kindergarten years to his teenage years in an increasingly desperate effort to slow her slide in the polls. Senator Clinton's campaign is recycling old news that Barack Obama has been candid about in a book he wrote years ago, and he's talked about the lessons he's learned from these mistakes with young people all across the country. He plans on winning this campaign by focusing on the issues that actually matter to the American people."
Obama wrote about his teenage drug use in his memoir, "Dreams from My Father." His rivals have largely remained silent on the subject.
"Junkie. Pothead. That's where I'd been headed: the final fatal role of the young would-be black man," Obama wrote. Mostly he smoked marijuana and drank alcohol, he wrote, but occasionally he would snort cocaine when he could afford it.
Speaking to Manchester high school students earlier this month, Obama said he was hardly a model student and had experimented with drugs and alcohol.
"You know, I made some bad decisions that I've actually written about. You know, got into drinking. I experimented with drugs," he said. "There was a whole stretch of time that I didn't really apply myself a lot. It wasn't until I got out of high school and went to college that I started realizing, 'Man, I wasted a lot of time."'
New polling shows Clinton and Obama basically tied in New Hampshire. A CNN-WMUR-TV poll conducted by the University of New Hampshire shows Clinton at 31 percent support, Obama at 30. The same poll had Obama trailing by 20 points in September.
Clinton's campaign has distributed its first flier that criticizes Obama's health care plan for leaving 15 million people without insurance. TV ads following the same theme also have been prepared.
"This is not the time to go back to the same old politics of, 'now I'm going to smack you over the head with a baseball bat and call into question your character,"' Obama co-chairman Ned Helms told reporters in a conference call earlier Wednesday, decrying what he said was Clinton's negative campaign.
In Iowa, Democratic presidential rival said of the comments: "I reject it. I reject it, and I want nothing to do with that kind of politics."