The 47-year-old former Republican vice presidential candidate was speaking on an Alaskan morning radio show, the 'The Bob and Mark morning show', when she refuted the claims made in 'National Enquirer' newspaper earlier this month.
Palin had been asked if it was hurtful that much of her harshest criticism originates in her home state of Alaska. She said she tries not to pay too much attention to the poll numbers -- but admitted that stories like the affair rumour were hurtful.
"Look at this recent (story) about Todd supposedly being all caught up in a prostitution ring in Anchorage. APD (the Anchorage Police Department) had to come out and say 'bull', there's no evidence...
"Heck, all they needed to do was ask me or ask Todd himself. 'Hey Todd, you been hanging out with hookers in Anchorage?' And he'd tell the truth, obviously it's a big lie.
"It's a waste of time... things like that are hurtful because when we trace back the lies and know that they come from our home state of Alaska, that's hurtful," the 'Daily Mail' online quoted Palin as saying.
The former Alaskan governor spoke in reference to an 'Enquirer' report earlier this month claiming a 36-year-old woman named Shailey Tripp had been arrested in Anchorage for running a brothel.
Police had confiscated physical evidence tying Palin's husband to her, the Enquirer said. The tabloid did not reveal what the evidence was or when the alleged affair was to have taken place.
The New York Daily News quoted Anchorage police as blasting the report, slamming it as "guilt by innuendo". It said Tripp had been arrested for running an illegitimate massage parlour, but there was no Palin link.
It is not the first time that the Palins have been accused of affairs. The couple strongly denied similar claims in 2008 and 2009.