Chad Morrisette, a professional window dresser who created the Palin look-alike, says it went for more than $2,200 on Thursday but the buyer has changed his mind.
Morrisette says the winner thought he was buying a pro-Palin item and didn't realize the truth until he heard about the auction on talk radio.
The mannequin of the Republican vice presidential candidate made headlines after Morrisette hung it from the roof as part of a Halloween display last October.
Morrisette and his partner had vowed to keep it outside their home until Halloween, despite widespread criticism from neighbors and local officials. But Amid a growing frenzy of protesters and media surrounding his home, he decided two days before Halloween that his noosed Sarah Palin mannequin should be cut loose.
Besides a constant flow of angry callers, the homeowners had received a visit from the Secret Service and criticism from a Los Angeles County supervisor who ordered an investigation into whether the effigy constitutes a hate crime.
Morrisette hasn't said whether he will put the item back up for auction.