"I just don't understand why we can't get new leadership that would give us a fighting chance to turn the situation around before it's too late," the New York Democrat and potential 2008 presidential contender said in an interview with The Associated Press. "I think the president should choose to accept Secretary Rumsfeld's resignation."
"The secretary has lost credibility with the Congress and with the people," she said. "It's time for him to step down and be replaced by someone who can develop an effective strategy and communicate it effectively to the American people and to the world."
Asked about Clinton's comments, Pentagon spokesman Eric Ruff said, "We don't discuss politics."
Clinton had resisted joining the chorus of other Democrats demanding Rumsfeld's ouster. Her remarks Thursday were the harshest assessment yet from the woman considered her party's early front-runner for the 2008 presidential nomination.
The former first lady has come under attack from some in her own party for voting for the war in 2002 and her current opposition to a deadline for U.S. troop withdrawal.
She criticized Rumsfeld in person earlier Thursday during a Senate Armed Services Committee hearing.
"Under your leadership, there have been numerous errors in judgment that have led us to where we are," she said. "We have a full-fledged insurgency and full-blown sectarian conflict in Iraq."
The defense secretary rejected some of her specific criticisms as simply wrong and said the war against terror will be a drawn-out process. He said he never glossed over the difficulties of the fighting.
"I have never painted a rosy picture," he said. "I've been very measured in my words, and you'd have a dickens of a time trying to find instances where I've been excessively optimistic."