Yeah, I know, this is an old thread,
but I got the exact same problem,
so what was the fix for this?

Transfer case vacuum switch?

I believe you have a vacuum disconnect system in the front axle. If you look on the front axle on the passengers side, you should see a vacuum line connect point. With it disconnected, you will not be able to engage 4x4. And, there is a point where once engaged, it will not disengage as long as there is vacuum present. As I recall, when you disengage 4x4, you lose the vacuum. The vacuum operates a stepper motor that slides a sleeve which locks the front axle together.

Slow at disengaging indicates either the vacuum port is plugged or the sleeve has a binding that is not letting it retract.

Thanks John!

and just like the original poster, this morning it went back into 2x4 just fine after a rest over night.

The weird thing is that I went in and out of 4x4 four or five times yesterday and it was on the last trip off the beach that it got stuck.

This problem happened the past two times in the past year and I only went into 4x4 for a short amount of time so yesterday's all day transferring back and forth was weird.

For as cheap as the switch is I should just get it and when I crawl under the jeep to check it out I can replace it while I'm there.

I've heard of the PosiLock mod but don't know much about it ..... but looks like a more involved thing to do and right now just want it working again. It's been limiting my time out on the beach!

btw, I got a 1997 Jeep Grand Cherokee Laredo 4.0 liter straight 6 cyl with Select Track

Jeeps with the Select-Trac t-case (NP-242) do not have the vacuum disconnect front axle, only XJ's and YJ's with the Command-Trac (NP-231) have them. No ZJ ever came with the vacuum disconnect.

Try this next time it sticks in 4x4:
Shift to 2wd at a slow speed, forward gear. If the t-case does not shift to 2wd, then come to a stop, at the last couple MPH, put the auto trans in neutral (Stick, push in the clutch) and come to a stop in a straight line. Put the trans in reverse (Safe area, of course!) and back straight up a couple feet, then put the trans back into neutral and let it coast. 95% of the time, the 4X4 will disengage once the driveline unwinds without a load.

Causes:
The Select-Trac t-case uses a rather weak spring to disengage the 4x4. The t-case shift lever moves to the 2wd position, but it's actually the spring that moves the shift fork out of 4x4. Now, if your tires are SLIGHTLY off size from each other, either due to wear or mismatched sizes, or pressures, it gets harder for the spring to disengage the 4X4 from the driveline wrap due to the differing wheel speeds.

Cure:
What I would recommend is to actually inspect each tire, the pressures should be even, the sizes and brand must be the same, and the circumference must be equal to less than 1/2" difference between each tire, better under 3/8". Once they are, you will find it much easier to shift the Selec-Trac Transfer case.

I was not sure which models came with the central axle disconnect. I have experienced similar issues with my 94 YJ and now have the Posi-Lock which introduces its own set of problems. But, once adjusted correct, it works great.

ive seen these systems not want to engage or disengage when cold, never when warm. as for getting it to disengage, ive had many 4x's that wouldnt come out of 4wd unless i backed up 15/20 feet after shifting back into 2wd. most notorious for it that ive owned were dodge and mitsubishi, both of which share technology and components with jeep. sometimes with my monty, id have to back it up a couple hundred feet to get it to shift back into 2wd. it only happened a couple times, didnt see backing it up so i thought id mention it.

I am a very new Jeep owner and I put my 1995 Grand Cherokee Laredo with selectrac into 4X4 for the first time on Saturday 1/7/12 and could not get it back to 2WD. I called my Jeep buddy who advised me to first start the engine and put the trans in neutral and shift the lever from 4X4 to 2WD and if that did not work to put the trans in reverse with the brake on and also shift from 4X4 into 2WD. That worked! Simple solution and not on the fly.

I don't know if I tried reverse ...... are your tires the same size? Mine are not!

If your tires are not the same size, you are going to experience a number of issues when shifting into and out of 4x4.

Basically, tires on each axle must be same size to reduce wear on ring and pinion and spider gears in differential.

And, tires on front and rear axles need to be the same size to keep binding and gear wear to a minimum.

Tire pressure differential on same size tire can also cause shifting/binding issues.

So, start by installing the same size tires with correct air pressure and see if that corrects your problem.