The 4WD transfer case encoder motor position sensor or the selector switch may fail causing the service 4WD message to be displayed. Fault code(s) stored in the transfer case control module will be of assistance in determining the exact fault causing the message to be displayed.Google+
Car Problem Reports
Chevrolet Avalanche 1500 4WD Transfer Case Position Sensor/Selector Switch May Fail
Chevrolet Avalanche 1500 Problem
Drive Trains Affected: 2WD, 4WD
Average Mileage: 111,644 mi (25,000 mi - 220,000 mi)
Visitor, 2003 Chevrolet Avalanche 1500, 4WD, 131,000 mi
Drive train jumps from 2 hi to neutral and sometime 4 hi and 4 low. This never happen while driven. Only when you start the vehicle up, you must check the selection.
Visitor, 2002 Chevrolet Avalanche 1500, 4WD, 140,000 mi
I had the exact intermittent problem on start up. I took mine to an honest and reliable transmission shop (Terry's Transmission in Syracuse, NY) after I had replaced the selector switch. They determined that it was in the wiring between the selector switch and the encoder motor. They said the encoder was fine. They referred me to a good electric shop, but I did not take it there for the electric repair yet. Likely it is a corroded connection that is "helped" by damper weather since there seems to be at least some correlation with the weather.
Visitor, 2003 Chevrolet Avalanche 1500, 4WD, 160,000 mi
I had the same problem with the 4 wheel drive transfer acting crazy. Took it to my Chevy dealer and they started exchanging parts with no idea to the problem. It took 4 trips to the dealer until they gave up. It cost me over a grand and I demanded them to fix my truck. I did some research on the internet and found TSB #05-04-21-003C dated Apr. 15, 2008. It instructed the Tech to check the wiring harness from the encoder to the sensor. The wiring harness will short out from moisture and cause false reading to the sensors. I hand delivered this TSB to the Chevy Service Dept and told them to check the wiring harness before they replaced the encoder. I finally got my truck back at 4:00 PM working great. You know and I know, they will never admit to what really took place. So guys check your wiring harness before you start pulling sensors, when your transfer start acting crazy.
my service 4 wheel drive indicater is showing on my screen what is the fix for this
sometimes it works ; electric shift, sometimes it doesn't. seems to be affected by slush and cold. sometimes the red neutral light goes on, sometimes the whole thing goes blank. Once I was driving the red neutral light was on and all of a sudden it whacks down into 4 low. Luckily I was just coming ouut of town and not up to speed. When spring hits and I can look at it,I can't get it to do it. Never fixed third winter coming up now.It is getting cold now and it is starting already, red neutral light on. start up truck is in 4x4 without ever selecting it.
Visitor, 2002 Chevrolet Avalanche 1500, 4WD, 168,000 mi
Removed xfer case encoder motor after removing plate and pulled front drive. Manually put into 2wd w/drive socket wrench and drove for 5 days before affording part and repair. Total cost under $300.00 including $60.00 for installation by area mechanic.
Got most of my info via internet and local Public Library. Ask yours about ENSCO, and you may be able to access Chilton's repair manuels.
Visitor, 2003 Chevrolet Avalanche 1500, 4WD, 125,000 mi
Grinding noise when attempting to use 4WD. Indicator lamp turned yellow and occasionally red.
Visitor, 2005 Chevrolet Avalanche 1500, 2WD, 120,000 mi
Similar problem, switch fail, but now it's even worse. had my actuator replaced, and the thing went into 4 low by itself then neautral, now only runs but wont move in any gear.
Visitor, 2004 Chevrolet Avalanche 1500, 4WD, 78,000 mi
stuck in 4wd auto looking for solution finally took it to a dealer (sorry floks they got you over a barrel the modual shorts out and they have to reprogram it) no they dont carry parts on hand no you cant do it yourself
Visitor, 2004 Chevrolet Avalanche 1500, 4WD, 44,000 mi
4W Service message appeared intermittently and would reset after pressing milage button. Re-appear sometimes after minutes and sometimes days..Dealer found the sensor to be bad and replaced $300.