(CNN) - Tim Pawlenty announced Tuesday that he will not seek a third term as governor, a decision that gives the Minnesota Republican room to start plotting a possible White House bid in 2012.
"I'm not ruling anything in or out," he said, when asked if he plans to seek the presidency.
Pawlenty, ticking through some poll numbers that show his approval rating hovering above 50 percent in a Democratic-leaning state, boasted that he "absolutely could have won, and would have won, a third term." But he said being governor "should not be a permanent position for anyone."
"When it comes to how long someone should stay in an elected position, a little less is better than too much," he said.
At a nearly hour-long press conference at the state capital in St. Paul, Pawlenty said he came to his decision in the last few days, but that he had given it much thought over the last six months.
Although he told reporters he is unsure of his future plans, two conservative activists in the Washington area who are close with Pawlenty and his team say the governor is actively thinking about the 2012 election.
The sources said that by leaving after two terms, Pawlenty will be able to go out on top by having closed a $4.6 billion budget gap without tax increases favored by the Minnesota Democratic-Farmer-Labor Party. Pawlenty did so using the line item veto and a process called "unalottment" that allows the governor to reduce spending under certain circumstances - something they said no other GOP governor has done.
The sources noted that campaign finance laws in Minnesota are restrictive and would would make it difficult to operate on a national stage.
As for how he will carry out the rest of his term, another GOP consultant who informally advises the governor said: "I think you will see an ideas factory out of the Pawlenty administration over the next 19 months. If some of those ideas are of interest to the American people, and the Republican Party, great."
Pawlenty called on the GOP to work harder if it hopes to defeat Democrats in future elections.
"It's got to be a party that accomodates Colin Powell and Rush Limbaugh if we're going to be successful," he said. "It can't be either or, it's both. It's got to be addition, not subtraction, and I am happy to help with that effort."
The two-term Republican governor has in the past pressed his party to a better job appealing to what he terms "Sam's Club voters" - lower and middle income voters who have drifted to the Democratic party in recent years for economic reasons but remain culturally conservative.
Pawlenty was first elected governor in 2002 and squeaked out a re-election victory in 2006, when Republicans across the country were hammered in the midterm elections. He was on John McCain's shortlist as a running mate in last year's election.
The governor has come under pressure lately to sign a certificate of election allowing Al Franken to take his seat in the U.S. Senate, if Minnesota's state supreme court rules in favor of Franken and against Republican Norm Coleman in the state's marathon Senate battle.
Shortly after his announcement, the Democratic Governors Association promised to help elect a Democrat to succeed Pawlenty next fall.
"Tim Pawlenty has been using Minnesotans as the testing ground for his extreme conservative beliefs - and now the launching pad for his national campaign," said Nathan Daschle, the DGA's executive director. "It's time they got a common sense, pragmatic leader who focuses on people above politics."