This is a very common issue with iPhone 4.
The button assembly inside the phone consists of two metal plates, a layer of tape and a tiny plastic nub that's glued to the tape.
This plastic nub has either been worn down och has fallen off.
The best thing to do is to buy the full button assembly withe sensors and everything, but...
DON'T replace the entire sensor because there is a 90% risk that the proximity sensor stops working. It's extremely sensitive.
What you do is take a small knife and replace the small plates with tape and everything. It's a bit tricky but I promise, it's the best sollution.
Take the phone apart and remove the screen so you easily can unscrew the button assembly.