Abstract: A mechanism is disclosed for selectively releasing or retaining a bit in a rotary power tool. The mechanism includes a tool housing having an interior bore. A spindle, mateable with the bit, is mounted within the bore. A tubular release sleeve is also mounted within the bore, and is slidable between a retention position and release position. A bushing is positioned within the bore between the sleeve and the housing, with its exterior surface contacting the bore. A retention key is mounted within the spindle. The key is adapted to cooperate with the release sleeve to extend into a circumferential groove in the bit when the sleeve is in the retention position, and move away from that groove when the sleeve is in the release position. A spring is used to bias the release sleeve into the retention position, and a pin is mounted on the tool housing to hold the bushing within the housing.