The Hubbard chain with a magnetic impurity of arbitrary spin S is stud
ied using the Bethe ansatz technique. We consider two kinds of impurit
ies which interact with itinerant electrons on the neighboring lattice
sites without destroying the integrability. The correlations in the h
ost always induce valence fluctuations at the impurity site. For a rep
ulsive Hubbard U, an impurity coupled via antiferromagnetic exchange t
o the host reveals magnetic properties similar to those of the ordinar
y Kondo effect. In contrast, a hybridization impurity (Anderson-like)
embedded into the attractive Hubbard model gives rise to essentially d
ifferent magnetic behavior. This difference is a consequence of the sp
in gap in the host.