On November 21, 1994, Palmer announced she was launching a campaign committee to run for the seat of indicted U.S. Rep. Mel Reynolds (D-2) and suggested that the then 29-year-old Jesse Jackson, Jr., who had just moved a few blocks into the 2nd Congressional District after Mel Reynolds' August 1994 indictment-run for her State Senate seat instead of running for Congress.
On June 27, 1995, Palmer announced she was running for Congress and would be giving up her State Senate seat instead of running for re-election in 1996. The following week, newspapers reported that Palmer supporter Barack Obama-who had been announced as chairman of the $49.2 million Chicago Annenberg Challenge on June 22 and whose memoir Dreams from My Father would be published on July 18-would announce he was running and would be a front-runner for Palmer's State Senate seat; at the end of July, Obama launched a campaign committee to run for State Senate.
On September 14, 1995, three days after Governor Jim Edgar set November 28 as the date for the special primary election to fill the vacancy created by the resignation of Mel Reynolds following his August 1995 conviction, Palmer's supporters held a City Hall press conference asking State Sen. Emil Jones to stay out and State Rep. Monique D. Davis and Jesse Jackson, Jr. to drop out of the race for Reynolds' Congressional seat-Jones had told his supporters that morning that he had decided to enter the race.
On September 19, 1995-the first day of the 13-week period in which candidates could circulate nominating petitions to win a place on the ballot for the March 1996 primary-Obama announced his candidacy for Palmer's State Senate seat to a standing-room-only audience of 200 supporters at the Ramada Inn Lakeshore at 4900 S. Lake Shore Drive in Hyde Park-Kenwood in the same room where thirteen years earlier Harold Washington had announced his successful run for mayor. Palmer introduced and endorsed Obama as her successor to supporters that included 4th Ward Alderman Toni Preckwinkle, 5th Ward Alderman Barbara Holt, State Rep. Barbara Flynn Currie, Cook County Clerk David Orr, and many other politicians.
On November 28, 1995, after finishing a distant third in the 2nd Congressional District special primary election behind the winner, Jesse Jackson, Jr., and Emil Jones, and dismayed at receiving only 2,917 votes in Chicago and 3,426 votes in suburban Cook County, a disappointed Alice Palmer told a small gathering at a Harvey hotel that she wouldn't seek re-election to the state Senate and was undecided about entering the March 1996 primary for the 2nd Congressional District seat.
After her defeat, Palmer ran for re-election to her State Senate seat and filed nominating petitions with 1,580 signatures on December 18, 1995-the last day to file nominating petitions. Obama challenged Palmer's hastily gathered nominating petitions and those of the three other prospective candidates. Nearly two-thirds of the signatures on Palmer's nominating petitions were found to be invalid, leaving her almost 200 signatures short of the required 757 signatures of registered voters residing in the Senate district; neither of the other three prospective candidates had the required number of valid signatures, leaving Obama, who had filed nominating petitions with over 3,000 signatures on the first filing day, as the only candidate to earn a place on the March 1996 Democratic primary ballot.
Obama said that the challenges were necessitated by the obvious flaws in the challengers' signature sheets. "To my mind, we were just abiding by the rules that had been set up," he said in a 2007 interview with the Chicago Tribune. When asked if voters were not disserviced by a ballot with no opposing candidates, Obama said "I think they ended up with a very good state senator."
Palmer endorsed Hillary Clinton for the Democratic presidential nomination in 2008.