The news was first reported Friday by the political website Real Clear Politics, and was later confirmed by The New York Times. A Fox News representative was not available for comment.
It was not immediately clear whether the breakup was mutual.
"We have thoroughly enjoyed our association with Gov. Palin. We wish her the best in her future endeavors," said Fox News executive Bill Shine in a statement to The New York Times.
Palin signed her deal with Fox in early 2010, not long after resigning as governor of Alaska, and was, for a while, one of the network's most popular personalities. Her lucrative deal earned her $1 million a year, making her the highest-paid contributor on the channel. But as her star began to fade, rumors began to swirl that she was on the outs at Fox News.
Network chief Roger Ailes stoked the fires when he publicly claimed that he only hired Palin because "she was hot and got ratings" and said she had "no chance" at being elected president.
The spat heated up once again this August, when Palin took to her Facebook account to grumble about being shut out of the network's coverage of the Republican National Convention. She has not appeared on Fox News since December.
No word yet on what Palin plans to do with the studio Fox built in her Wasilla, Alaska, home in 2010, but there's little doubt the publicity-friendly family will find a use for it. Husband Todd competed on the NBC series "Stars Earn Stripes" last year, and daughter Bristol followed up the poorly received "Life's a Tripp" with her second stint on "Dancing With the Stars." The former governor also took a stab at nonpartisan morning television, guest-hosting "Today" in April.