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I have a 2005 Tacoma and it is stuck in 4wd. Took to dealer and this is what they are stating and to fix they want to replace with used transfer case for 1100.00. I don't want to think this is the solution so if anyone can point us in the right direction it would be appreciated.
 

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Last time I checked (a couple of years ago) a new transfer case cost a bit over $700. Their price installed is a bit high IMO. There is no guarantee that is the problem, from what I gather. There are several other possibilities. I would suggest you do a little research on the web. The only problem is driving on pavement in 4WD is not recommended. Tacoma World has several threads on the subject.

Mine did the same thing a while back. I didn't do anything to fix it, but it has worked correctly for several years, now.
 

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Welcome to TN. Was it driven on pavement while in 4WD? If so, the drivetrain can get bound up. Try reversing while turning left-right-left-right. That might relieve the binding and allow the t-case to pop out of 4WD.
 
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