Calmly, yet firmly. My son has just turned 9, and he's been like this for about two years now. He's really started to improve in the last couple of months. It's taken this long to sort out because I've not always dealt with it well - I have two younger sons also, and my patience doesn't always last out the day!
But when I'm in the right frame of mind what works really well is still the good old 'time out'. I remove my son from the room, and I go with him. I ask him to stop talking, because I am now talking. Sometimes that takes a few goes, because he's saying 'I haven't done anything wrong', 'why are you always picking on me', or 'I hate you'. I don't shout back, and I keep calmly (but firmly) saying 'stop talking, it's my turn'. Then I calmly (but firmly!!) talk to him about why his behaviour is unacceptable, and explain to him what it is about that behaviour that I cannot tolerate. This is because he often doesn't realise what he's done that's so awful, and just thinks he's being hard done by, or picked on by me. This is really now starting to work. I make him do the 'time out', and he gets a good ten minutes now, to sit and think about things. He always comes to me and apologises for his behaviour after that, and I make him apologise to his brothers too. Then we all make friends again, and put the bad behaviour behind us.
I treat this behaviour just like I do any other bad behaviour. The important thing is not to get into an argument with the child; just because the bad behaviour is verbal, doesn't mean it needs to be treated any differently to, say, a tantrum, or whatever. And as long as they're allowed to air their opinions when they're talking calmly and rationally, they're not going to feel as if you're just being mean all the time.