After months of leaving her fans guessing, Palin said in a statement that she and her husband Todd "devote ourselves to God, family and country." She said her decision maintains that order.
Palin sent the statement to supporters. She told conservative radio host Mark Levin that she would not consider a third party candidacy because it would assure President Barack Obama's reelection.
In a video posted on YouTube, Palin said, "you don't need an office or a title to make a difference."
Sen. John McCain plucked Palin from relative obscurity in 2008 by naming her as his running mate. She electrified Republican activists for a while, delivering a well-received speech at the GOP national convention. But Palin later seemed overwhelmed by the national spotlight, faltering at times in televised interviews even when asked straightforward questions.
Palin's announcement Wednesday was much anticipated but not greatly surprising. Her popularity had plummeted in polls lately, even though she remained a darling to many hard-core conservatives. Some Republicans felt she waited and teased too long about a presidential candidacy. Some remained perplexed by her decision to quit her job as governor with more than a year left in her single term.
Palin also angered some Americans with a defensive speech shortly after a Democratic congresswoman was gravely wounded in an Arizona shooting in January that killed six people.
Palin's announcement came one day after New Jersey Gov. Chris Christie said he would not run. Republican insiders say the field is set.
It includes former Massachusetts Gov. Mitt Romney and Texas Gov. Rick Perry, whom party insiders see as the strongest contenders. Libertarian-leaning Rep. Ron Paul of Texas continues to draw a devoted following and former pizza company executive Herman Cain has gained in recent polls.
Voting in the Iowa caucus and New Hampshire primary will start in about three months.
Because Palin's star had faded, it's not clear that her decision will have a big impact on the Republican race. Some analysts said Palin might have drawn significant conservative support, especially in Iowa. If so, she might have split that constituency with Perry, Cain, Minnesota Rep. Michele Bachmann and others, possibly giving Romney a chance to win the caucus with a relatively modest plurality.
Others felt Perry benefits from Palin's decision because it helps him portray himself as the best-known conservative alternative to Romney.
Republican adviser Matt Mackowiak said Romney benefits from Christie's decision, and Perry benefits from Palin's, so it's "a wash."
Palin told Fox News Channel's Greta Van Susteren on Wednesday night: "After making the decision today and making the announcement, I know beyond a shadow of a doubt ... I know that it's the right decision."
Palin said she chose to announce her decision in a letter to supporters so she wouldn't draw it out, and she jabbed at Christie for his news conference Tuesday announcing his decision not to run.
"I made my announcement today in the format that I did because this was his 7 millionth `no' and I didn't want to go through all of that, not make a big darned deal about it," she said.
In a statement, Perry called Palin "a good friend, a great American and a true patriot."
"I respect her decision and know she will continue to be a strong voice for conservative values and needed change in Washington," he said.
McCain, whose staff often clashed with Palin, said he was confident "she'll continue to play an important role in our party and for our nation."
Bachmann in a statement called Palin "an important voice in the conservative movement" with "a lifetime of opportunities ahead of her."
Palin fans expressed frustration and disbelief on conservatives4palin.com, a supporter Web site.
"Oh! Big mistake, Sarah, for the country and for you. And why wait so long? Geez," wrote a poster identified as militantfeather.
Another, identified as Mark Dormann, said: "Sarah I feel betrayed. You are the one we are waiting for. No one else will reform America. ... you have broken my heart :("
Palin repeatedly stoked speculation about a presidential bid, in part by visiting Iowa, home of the leadoff nominating caucuses, seven times since leaving the governorship in 2009.
Last month, she gave a campaign-themed speech at a tea party rally that drew thousands to a town south of Des Moines.
"I've said all along she's a force in her own right," said Des Moines Republican Becky Beach, who became a friend and part of Palin's small circle as her key planning contact in Iowa. "In this capacity, however it takes shape, she'll be someone who has an impact on the 2012 election."
Palin loses the opportunity to seize a network of organized supporters in Iowa, put together by California lawyer Peter Singleton, who has spent the better part of the year in the state. He said there is no one candidate who can lay claim to the voter database, mailing list and team of campaign volunteers he put together in Iowa.
In her statement, Palin said, "my decision is based upon a review of what common-sense conservatives and independents have accomplished, especially over the last year. I believe that at this time I can be more effective in a decisive role to help elect other true public servants to office - from the nation's governors to congressional seats and the presidency. We need to continue to actively and aggressively help those who will stop the `fundamental transformation' of our nation and instead seek the restoration of our greatness, our goodness and our constitutional republic based on the rule of law."
Associated Press writers Kasie Hunt in Washington, Becky Bohrer in Alaska and Tom Beaumont in Iowa contributed to this report.