The protest came about two hours after Palin delivered a rousing speech at Anchorage's new convention center before leaving the state to return to the campaign trail. Palin was named John McCain's running mate on Aug. 29. This was her first return since then to her home state.
The protesters, including supporters of presidential candidate Barack Obama and those who don't agree with Palin's positions on abortion, polar bears, Iraq and other issues, lined one side of the street near Anchorage's main library building.
A much smaller number of mostly pro-Palin supporters were on the other side of the street, chanting "Sarah! Sarah!"
Police were at the scene, but there were no immediate reports of clashes.
Angie Doroff, 46, helped organize the rally. The wildlife biologist, yoga teacher and artist said she was pleased and surprised at how many people showed up.
"We're not alone. A lot of people are worried about the nomination of Sarah Palin," Doroff said, as cars drove by honking their horns in support.
Barbara Norton, a 56-year-old midwife, stood near a sign that read, "Alaskan Women for Choice."
"I think America does not understand how absolutely extreme her positions are — even to the right of George Bush and John McCain," Norton said. "She is frightening."
Anne Applegate-Scott, a 44-year-old attorney and stay-at-home mom, held a sign that said, "I don't vote for liars." Applegate-Scott said she actually voted for Palin for governor but won't vote for the McCain-Palin ticket. Palin, she thinks, has become a "product" of McCain handlers and won't let her talk to the media.
When she does talk, Applegate-Scott accused Palin of lying about her record.
"She lied about her position on earmarks and building the bridge," Applegate-Scott said referring to the infamous Bridge to Nowhere. "She talks about her being a feminist but it is convenient feminism, it doesn't cost her anything."
One woman held a sign that read, "I'm Bail'in on Palin!" Another said, "Pro Woman, Anti-Palin." Another read, "What About Healthcare?"
One person strolled through the crowd in a polar bear suit. The bear was holding a sign that said, "Polar bear moms say No to Palin," a reference to Palin's opposition to placing the polar bear on the threatened species list because that could interfere with drilling for oil off Alaska's coast.
As more people gathered, the rally took on the look of a large family gathering with protesters hugging each other and exclaiming their surprise that so many people had gathered.
On the lawn outside the library two men held up a large banner that said, "Iraq War is Fraud. Palin is a puppet." One of the men waved an Alaskan state flag.
Some of the signs spoke out against Palin's anti-abortion position. Laura Kimmel, a 40-year-old Anchorage woman expecting her second baby in April, wore a clothes hanger with a sign attached that said, "This is not a surgical instrument. Keep abortions safe and legal."
Susan Soule, 65, a part-time health consultant, said she is old enough to remember when abortion wasn't legal and what women went through who wanted to terminate their pregnancies.
"I know the terror of unwanted pregnancy and back-room abortions. I know what that did to women," said Soule.
Hilary Seitz, 39, attended the rally with her two girls, 8-year-old Abbigale and 11-year-old Taylor. If McCain becomes president and Palin is the VP, Seitz said she fears what will happen on the Supreme Court and keeping abortion legal.
"It really scares me that if we lose that option what are women going to do," Seitz said. She said that she was at the rally for her girls and their futures.
Earlier in the day, a smaller crowd of Palin supporters gathered at the convention center. Angelina Klapperich, 14, wore her crown for winning Miss Alaska Junior Teen in 2007.
"I think she is a super role model for young people," the girl said of Palin, who won Miss Wasilla and came in second at the 1984 Miss Alaska pageant, taking home the Miss Congeniality award. "She has so much integrity and she is really confident."
Also on Saturday, 14 people held signs like "Honk if You Love Gay People" during a 12-hour vigil outside the Abbott Loop Community Church in Anchorage, where a conference promising to convert gays into heterosexuals through the power of prayer was being held.
Palin's place of worship, the Wasilla Bible Church, promoted the "Love Won Out" conference, sponsored by Focus on the Family.
"Our main message is that God loves everyone the way they are," said protester Mike Mason. "People should be accepted for who they are."
Attempts by The Associated Press to reach someone at the church Saturday for comment were not successful.