ANCHORAGE, Alaska -- Sarah Palin has emerged as a key figure in an Alaskan Senate primary race so close that it will now be decided by absentee ballots.

Heavily favored Sen. Lisa Murkowski watched the surprising returns showing a tight race Tuesday night, becoming painfully aware of both Palin's impact and growing anti-government sentiment.

With all precincts reporting, the Republican senator trailed conservative lawyer Joe Miller by 1,668 votes Wednesday, leaving both hoping that uncounted absentee ballots will give them the victory.

The state sent out about 16,000 absentee ballots, and about 7,600 had been received by Monday, but they are not part of the tally. Absentee ballots postmarked by election day can be received for up to 10 days after the election, meaning the count of outstanding mail-in votes won't begin for several days.

Regardless of the final outcome, the primary is an indication of the influence Palin wields in midterm elections as she looks ahead to a possible White House bid in 2012. She had been on a losing streak as of late in her role as "Mama Grizzly" kingmaker, but that seems to have changed with wins in other primaries Tuesday and the possibility of Murkowski losing.

The race is the latest chapter in a long-running political saga between Palin and the Murkowski family dating back to 2002, when then-Gov. Frank Murkowski appointed his daughter to the Senate and bypassed the up-and-coming Palin for the position. Palin routed Frank Murkowski four years later in the primary on the way to her becoming governor, and now she may have helped derail the career of his daughter.

The women have occasionally clashed since then on the issue of health care reform and Palin's decision to resign as governor last summer. They have denied any bad blood, but that didn't stop the potshots in this latest race, including attacks on Murkowski on health care that the senator said were horribly misleading and false.

Murkowski on Wednesday declined to discuss what kind of role Palin might have had on the race.

Pollster Marc Hellenthal, who often works with Republicans, lays the blame for Murkowski's predicament on her failure to respond to the barrage of negative ads by the Tea Party Express.

Murkowski focused on her record and experience for much of the campaign, but finally began fighting back near the end. But by then, it was "way too late in the ballgame," Hellenthal said.

"You have to respond to a negative (ad) and those that don't are retired. She's about to be retired. ... The high road's a grave yard, isn't it?"

At a news conference in Anchorage, Murkowski mentioned that then-Sen. Ted Stevens in 2008 went to bed one night in the lead but when all the votes were counted, eventually lost his Senate seat of 40 years to Mark Begich. She said U.S. Rep. Don Young also reminded her of a race he had won after going into the election showing he was behind.

"It ain't over yet, folks," Murkowski said Wednesday. "There is much, much yet to be counted."

Miller, 43, is an Ivy League-educated West Point graduate who served in the Gulf War before moving to Alaska more than 15 years ago because of his love of the outdoors. He said he entered his first statewide run for public office because he believes the nation is "in crisis," with out-of-control funding of government entitlements and a rising national debt.

He racked up a long list of endorsements, including Palin, Mike Huckabee, conservative talk show hosts and the California-based Tea Party Express. Miller credited Palin with putting him on the national map.

"Gov. Palin put the spotlight on the race for us in the beginning," said Levi Russell, spokesman for the Tea Party Express, which spent at least $550,000 to help Miller.

The fact that an incumbent Alaska senator is danger of being ousted for pursuing federal dollars is stunning given the state's long history of relying so heavily on government money.

Political scientists in Alaska didn't expect the race to be this close -- or for Murkowski to be in any real jeopardy, citing the fact she is a known entity in Alaska and boasts seniority in the Senate.

Clive Thomas, a political science professor at the University of Alaska Southeast who has spoken extensively on the Palin phenomenon, summed the close race up like this: "I'm confused."

When it comes to Murkowski, "it isn't like she's done anything bad or anything, you know what I mean? She's pretty innocuous." He also doesn't think Palin played as much a role in the race as a shift to the right and a bash-the-federal-government sentiment in Alaska.