Thompson’s camp is denying this story in Politico:

Several Republican officials close to Fred Thompson‘s presidential campaign said they expect the candidate will drop out of the race within days if he finishes poorly in Thursday’s Iowa caucus.Thompson’s campaign, which last spring and summer was generating fevered anticipation in the media and with some Republican activists, has never ignited nationally, and there are no signs of a late spark happening here in Iowa, where even a third-place finish is far from assured.This reality-combined with a fundraising drought-left well-connected friends and advisers of Thompson Wednesday evening predicting that he will pull the plug on hype and hope before the Jan. 8 New Hampshire primary.Thompson’s departure could shake up the race more than his continued presence. Friends and advisers said they have long considered it likely that if the lobbyist-actor is forced from the race he would endorse John McCain his former Senate colleague who lately has been staging a political revival in New Hampshire.”Without a solid third-place finish, there’s no point in going on,” a Thompson adviser said Wednesday. “It was an honorable race, and he turned out to be a good candidate. The moment had just passed.”A Thompson campaign source said there is “a strong likelihood” that if Thompson comes in a distant third in Iowa, with less than 15 percent of the vote, he would drop out soon-most likely before this weekend’s New Hampshire presidential debates.

Here’s a report from Byron York and a video of Thompson himself denying the rumors:

(via)He accuses one of the other campaigns of planting the story, someone with too much time on their hands. And he gives a very good answer to the question, what was he going to do to people to caucus for him (Hillary and Obama are offering shovels, rental cars and babysitting)? He said that he was offering to be a very good president. Yeah, that would be enough to get me to caucus 🙂