Sanders, who had questioned the former secretary of state's qualifications to be president, conceded that she was qualified but said she had shown poor judgment by taking money from Wall Street for speeches she gave, by voting as a U.S. senator to back the 2003 Iraq invasion and by supporting free trade deals.
"Does Secretary Clinton have the intelligence, the experience to be president? Of course she does but I do question her judgment," Sanders said as the debate opened in the New York borough of Brooklyn, five days before New Yorkers vote in a crucial nominating contest.
"I question her judgment which voted for the war in Iraq, the worst foreign policy blunder in the history of this country," he said.
"I question her judgment about running Super PACS that are collecting tens of millions of dollars from special interests ... I don't believe that is the kind of judgment we need."
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Clinton, 68, responded that the charges were an attack also on President Barack Obama, who as a candidate raised money on Wall Street and had Super PACS, independent political action committees that raise unlimited sums of money from corporations, unions, associations and individuals.
Clinton called it a "phony attack that is designed to raise questions when there is no evidence or support to undergird the insinuations that he is putting forward in these attacks."
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Clinton said under the "bright lights" of New York, Sanders was beginning to show his lack of depth on policy issues.
She cited an interview with the New York Daily News editorial board where she said he was unable to clearly explain how he would achieve his oft-stated goal of breaking up the big banks.
"You need to have the judgment on Day One to be both president and commander-in-chief," Clinton said.
The last nine opinion polls taken in New York, a state Clinton once represented in the U.S. Senate, show her with a double-digit advantage over Sanders.
It follows a contentious period in a Democratic campaign that has been relatively mild compared to the Republican Party brawl.
Earlier on Thursday, Sanders denounced as "inappropriate and insensitive" a warm-up speaker's call at a Manhattan rallyfor Sanders on Wednesday to stop electing "corporate Democratic whores," a remark seemingly aimed at Clinton.
Brooklyn-born Sanders, 74 and a U.S. senator from Vermont, has won seven of the last eight state Democratic nominating contests, but most of those were small states that did not help him cut Clinton's commanding lead in the race for the 2,383 delegates needed to win the nomination to represent the party in the Nov. 8 presidential election.
Clinton leads Sanders by 251 bound delegates to the July nominating convention. Her lead balloons to almost 700 when the support of superdelegates - party leaders who are free to back any candidate - are added.
Sanders faces a tough task cutting Clinton's lead since Democrats award delegates in each state proportionally to the candidate's level of support, allowing her to pile up delegates and draw nearer to the nomination even if she loses a state.
Sanders has pledged to battle all the way to the party's
July convention in Philadelphia, arguing superdelegates will switch to him once they realize the extent of his popular support.
Clinton so far has 2.4 million votes more than Sanders in the state-by-state nominating race.
