No. Changing the style of anything in the ad is not permitted.

I have never seen the URL in an AdSense ad underlined, on my site or any other so it must have something to do with your settings. Check with Google Support.

I sure see them underlined. I would think that's the default behaviour in every browser, but you can generally configure your browser not to underline if that's what you prefer.

In any case I am pretty sure regular publishers don't have the ability to customize this.

[Added - Oh, I see your point. I assume the OP was referring to the hotlinked title, not the URL itself.]

why not look at it in reverse? Make YOUR links underlined instead?
Sure they dont look so good...but when u underline yourlinks, and add no rollover effect to them they sure do hide well!

The OP asked about the URL, not the hot linked title, so that's what I was responding to. Since my earlier reply, I have seen a few ads where the URL is underlined but in all cases (that I've seen) it's only when there is just one ad displayed in an ad size intended for more than one ad.

It is underlined on my website. It is better. Hyperlink started as underlined. User can spot a mile a way. It is hyperlink.