Palin first became a contributor to the top-rated cable news network in 2010 after unsuccessful run to be vice president in 2008.
Fox News Channel president and chairman Roger Ailes said the reason he brought her on board was because "she was hot and got ratings."
Palin's screen presence on the network had diminished in 2012, and she hadn't appeared on air since mid-December, The Hollywood Reporter said Friday.
Palin had publicly spoken out against the network in August on Facebook.
"I'm sorry Fox canceled all my scheduled interviews tonight because I sure wanted to take the opportunity on the air to highlight Senator John McCain's positive contributions to America, to honor him, and to reflect on what a biased media unfairly put him through four years ago tonight," she said, referring to the night of vice presidential candidate Paul Ryan's Republican National Convention speech.
Fox News Channel executive vice president of programming Bill Shine confirmed Palin's departure Friday.
"We have thoroughly enjoyed our association with Gov. Palin," he said. "We wish her the best in her future endeavors."
It is not clear if the departure was Palin's or the network's decision.