(For factbox on Republicans seen as potential candidates for their party's nomination in 2012, click on [ID:nN03184162]
* Palin says to work 'outside government' for change
* Gives no indication of future plans
* Analysts speculate on possible bid for presidency
* Lieutenant Governor Sean Parnell takes over July 26 (Adds quote from former Alaska governor Knowles)
By Yereth Rosen
ANCHORAGE, Alaska, July 3 Alaska Governor Sarah Palin, the Republican Party's vice presidential candidate in 2008, said on Friday she will resign this month, an unexpected move that could signal a run for higher office.
Palin took no questions after a brief news conference in her hometown of Wasilla, Alaska, members of her state Cabinet by her side. She gave no indication of her future plans.
"I'm not seeking re-election" in 2010, Palin said, adding she would transfer authority to Lieutenant Governor Sean Parnell on July 26.
Palin, Arizona Sen. John McCain's surprise pick as his running-mate in the 2008 presidential race, rallied the party's conservative base but alienated others who believed she did not have the experience to be vice president.
She has been mentioned as one of the top three Republicans who could vie for the party's presidential nomination in 2012. Those mentioned most often include Mississippi Governor Haley Barbour and former Massachusetts Governor Mitt Romney.
"We are not retreating, we are advancing in a different direction," Palin said. "We know we can effect positive change outside government at this moment in time."
Palin, 45, said her decision came after much "prayer and consideration." She said she did not want to waste time on "political blood sport" and cited public criticism of her actions and her family since the 2008 campaign.
"You are naive if you don't see a full-court press right now on the national level picking apart a good point guard," Palin said, using a basketball analogy.
"She closed a chapter in Alaska politics on a very weird and bizarre note," said former Alaska Governor Tony Knowles, a Democrat who served two terms, in a telephone interview.
"Friends or foes alike would have never thought that she would be a quitter, but that's what she did today."
WHAT LIES AHEAD
The announcement at the beginning of a three-day holiday weekend, with little Washington news expected, gave Palin wide access to the airwaves and could make for a strong start at gaining public attention.
Republican strategist Sophia Nelson said in the online publication Huffington Post that Palin vowing to work for change "from outside government" was "code for 'I'm running for president.'" [ID:nN03181731]
Other analysts wondered if it was a smart political move.
Andrew Halcro, a Republican who ran against Palin in 2006, said he did not think resigning would help her chances.
"If she was trying to transition to the national stage, there was a much better way to do it," he said.
Princeton University professor Julian Zelizer said Palin's future in public life depends on the reason she stepped down.
"If there is any evidence that the decision was a result of political problems or looming scandals, she is done," he said.
"The Republican Party already feels to be in a moment of crisis," after losing the presidency and control of Congress to the Democrats. He noted that in 2008 "she revealed many weaknesses ... limited policy knowledge, association with fringe groups, weak performances on television and more."
Palin faced criticism and ridicule from Republicans and Democrats alike after embarrassing television interviews that raised questions about her knowledge and experience.
During the campaign, the mother of five revealed her unmarried 18-year-old daughter, Bristol, was pregnant but planned to marry the baby's father. The couple split in March.
Palin was cleared of wrongdoing in an abuse-of-power probe into the firing of Alaska's public safety commissioner.
In May, Palin signed a book deal to tell her own story, for an undisclosed sum, with News Corp's HarperCollins.
Palin established herself as a party outsider by promoting a natural gas pipeline project opposed by Alaska Governor Frank Murkowski. She ran against the governor in 2006, defeated him in the primary, and then won the general election.
The project to ship abundant North Slope gas reserves to U.S. markets has been dimmed by the economic recession and a sharp dip in natural gas prices. (Additional reporting by Michelle Nichols in New York, Robert Campbell in Mexico, Andrea Shalal-Esa, Chris Wilson, Jeff Mason in Washington; writing by Doina Chiacu, editing by Jackie Frank and Todd Eastham)