WASHINGTON -- On a day when Sen. John McCain was blasting The New York Times for a story that alleged that he had had an inappropriate, romantic relationship with a female lobbyist eight years ago, he faced a fresh and unrelated dilemma that could also be potentially damaging to his campaign.

The nation's top federal election official yesterday told the Arizona Republican that he cannot immediately withdraw from the presidential public-financing system as he had requested -- a decision that could dramatically restrict Mr. McCain's spending until the general election begins in the fall.

The prospect of being financially hamstrung by the very fundraising system he helped create is the latest in a series of bitter challenges for the presumed GOP nominee, who still faces a fractured conservative coalition as he assumes the mantle of party leadership.

Yesterday, with his wife, Cindy, standing next to him at a Toledo, Ohio, campaign stop, Mr. McCain called The New York Times story "untrue" and assailed the newspaper, saying it was waging a "smear campaign" against him.

His aides went on the offensive, blaming the Times. "Obviously, we were very angry," said senior advisor Steve Schmidt, speaking to reporters as Mr. McCain flew to Michigan from Ohio. "When we read the story, my initial reaction was that it was something you would see in National Enquirer, not the New York Times."

Cindy McCain told reporters that she trusts her husband.

Mr. McCain disputed almost every part of the Times story, saying he did not have a romantic affair with lobbyist Vicki Iseman, and that he had never done inappropriate favors for her or other lobbyists. He denied part of the story, also reported in The Washington Post, that his staffers had confronted him about his relationship with Ms. Iseman.

Mr. McCain said that if staffers had had such concerns, "they did not communicate them to me."

Within hours of the story's publication, Mr. McCain sought to turn it to his advantage, sending out a fundraising appeal decrying the "baseless attacks" and urging contributions.

But Mr. McCain's attempts to build up his campaign coffers in advance of a general election contest appeared to be threatened by the stern warning yesterday from Federal Election Commission Chairman David Mason, a Republican. Mr. Mason notified them that the commission had not granted Mr. McCain's Feb. 6 request to withdraw from the presidential public-financing system.

The implications of that could be dramatic. Last year, when Mr. McCain's campaign was starved for cash, he applied to join the financing system to gain access to millions of dollars in federal matching funds. He was also permitted to use his FEC certification to bypass the time-consuming process of gathering signatures and get his name on the ballot in several states, including Ohio.

By signing up for matching funds, Mr. McCain agreed to adhere to strict state-by-state spending limits and an overall cap on spending of $54 million for the primary season, which lasts until the party convention in September.

But after Mr. McCain won a series of early primaries and the campaign found its financial footing, his lawyer wrote to the FEC, requesting to back out of the program -- which is permitted for candidates who have not yet received any federal funds, and who have not used the promise of federal funds as collateral for borrowing money.

Mr. Mason's letter raises two issues as the basis for his position. One is that the six-member commission -- which has four vacancies because of a Senate deadlock over President Bush's nominees for the seats -- lacks a quorum. Mr. Mason said the FEC would need to vote on Mr. McCain's request to leave the system, which is not possible without a quorum. Until that can happen, he will have to remain within the system, Mr. Mason said.

The second issue is more complicated. It involves a $1 million loan Mr. McCain made in January from a Bethesda, Md., bank. The bank was worried about Mr. McCain's ability to repay the loan if he exited the federal financing program and started to lose. Mr. McCain promised the bank that, if that happened, he would reapply for matching funds and offer those as collateral for the loan. While Mr. McCain's aides have argued that the campaign was careful to avoid using the funds as collateral, Mr. Mason indicated that question needed further FEC review.