CNN: 

Three sources close to Republican Rep. Mike Pence of Indiana tell CNN they are told he will announce he is not running for president in 2012 and will instead begin exploring a run for governor. These sources say he has been flattered by the efforts to nudge him into the GOP presidential race but, as one of the sources put it, "he is a realist and kept coming back to questions about the fund-raising." The second source said some around Pence also have reminded him of the difficulty of mounting a presidential campaign from the House, and noted that, at age 51, he would have a better platform to explore a presidential run if he first was elected governor.

Howey Politics in Indiana also reports that Pence will not run for president.

Update: The Indy Star confirms that he's running for governor: 

U.S. Rep. Mike Pence shut the door today on a run for the presidency, but left wide open the likelihood that he’ll seek a different office: Governor of Indiana. “In the choice between seeking national office and serving Indiana in some capacity, we choose Indiana,” Pence, R-Columbus, said of himself and wife Karen in a letter being sent to supporters. “We will not seek the Republican nomination for president in 2012.”