"Governor Palin has captivated everyone on both sides of the political spectrum and we are excited to add her dynamic voice to the Fox News lineup," Executive Vice President of Programming Bill Shine said announcing the contract.
Palin, 45, "will provide political commentary and analysis" for Fox News's political and business news programs and will host "periodic episodes of FNC's 'Real American Stories,' a series exploring inspirational real-life tales," a company statement said.
The series is to debut later this year, it added.
Palin joins a stable of conservative pundits at the channel, which has often been fiercely critical of Barack Obama's presidency.
"I am thrilled to be joining the great talent and management team at Fox News. It's wonderful to be part of a place that so values fair and balanced news," Palin said in the Fox News statement.
The statement made no mention of Palin's salary.
A mother of five, Palin ran for vice president last year on John McCain's losing ticket and is seen as a potential Republican presidential contender.
Her memoir, "Going Rogue," shot to the top of the US bestseller list in its first week after publication in November and is currently the number one New York Times bestseller.
A polarizing figure who generates a media frenzy with her every interview, Palin enjoys fervent support among Republican activists.
In mid-November she dropped a hint that she might seek to run for the White House in 2012 as champion of America's Republican right.
If she is good enough as a pundit to get her own show a la Rachel Maddow Fox would easily launch her to the White House in 2012. She's already got a built in audience and Fox News would probably advertise her relentlessly as their candidate (while remaining fair and balanced of course). So I guess this is pretty much a party post for bluetooth16 and afa_mom.