I was told by a transmission shop that my transmission was gone so I replaced it with a newly rebuilt transmission but still have the same problems. Transmission will shift up from 1st to 2nd by itself but will not shift into drive unless I put the transmission in Neutral, let off throttle for a moment and then shift back down into drive. When I put it back into drive from Neutral the transmission then shifts into drive. When I stop the vehicle, the transmission does not automatically go back down to 1st gear. I must physically put the transmission down into 1st gear and then back into Drive or it will try to take off in 3rd gear. It also will not shift into overdrive. I have replaced the transmission and still having problems. I don't want to put another transmission if I'm going to have the same problems. Any help?

Did you ever figure out what was wrong with the transmission? I just rebuilt my neutral safety switch, and although it starts in park again and the reverse lights actually work now...it now has the same symptoms you described. In drive it just wont automatically go back to first. i pretty much have to drive my automatic manually. Any advise would be appreciated!

Sounds like TCM transmission control module. What year is your XJ?