Palin will be only the second woman, after Geraldine Ferraro, to run on a major-party ticket for the position.
"[Palin] is exactly who I need. She's exactly who this country needs to help us fight the same old Washington politics of me first and country second," McCain said while introducing the newly-named running mate at a rally in Dayton, Ohio.
Palin's relatively short political resume makes her an unconventional choice. The 44-year-old mother of five and self-described "hockey mom" was elected governor just two years ago. Before that she was mayor of the 6,715-person town of Wasilla, Alaska.
But she has strong conservative credentials -- she is a lifetime member of the NRA and is known for her strong anti-abortion stance -- and a reputation as a reformer who has challenged her party's old guard in Alaska and slashed pork-barrel spending in the state.
She also triumphed in a tough campaign for the governership two years ago, defeating a well-funded Republican incumbent in the primary before taking on her Democratic opponent.
"She's not from these parts, and she's not from Washington, but when you get to know her you're going to be as impressed as I am," McCain said.
President Bush's former advisor Karl Rove said on Fox News that she would be "a breath of fresh air," and would appeal to women voters.
"It would be a clear sign by the McCain campaign that they would be making a bid" for women voters, Rove said, according to the Washington Post. "In the last 24 hours, we've seen both campaigns refocus themselves in a powerful way on the Hillary Clinton supporters."
Palin made that appeal explicit in her speech.
"It's fitting that this honor has been given to me almost 88 years to the day that women earned the right to vote," she said, suggesting that voters could build on Hillary Clinton's "18 million cracks in the glass ceiling" by electing her vice president.
Another GOP source told the Washington Post that Palin was a "stunning pick" who would appeal to conservatives, but acknowledged that she is "not really that well known."
The surprise choice was a closely guarded secret. Over the course of Friday morning, it slowly emerged that none of the assumed front-runners, such as Minnesota Gov. Tim Pawlenty and former Massachusetts Gov. Mitt Romney would be chosen.
Meanwhile, reports that a private plane from Alaska had landed in Middleton, Ohio, near Dayton Thursday night fueled speculation that the little-known Palin would be the pick.