My dad has a 2004 Montero Limited with less than 75k miles on it. He never had a problem with the car until this winter when he tried to put it in 4H it never engaged and the light stayed blinking. It has been about 2 months and the light still just blinks. He has been driving it like this with no problems. We have replaced:

Front transfer case freewheel clutch sensor
Freewheel clutch solenoid (under the hood)

So far neither has worked. I found those two solutions online but haven't seen anything else that could be a problem. The dealer charged $300 to troubleshoot, and all they came up with was an offer to replace the front transfer case for over $4,000. This seems like a ridiculous fix. Any help is appreciated.

 

Even when I am driving on 2H, the top 2 lights keep blinking.
When I shift to 4H the top 2 lights stop blinking.
I don't know what's going on.

Please share if you found any solution.

 

I still have the same problem. No changes. It stays blinking all of the time no matter what is selected (ie. 2x2,4x4,4L). Not sure if it is in 2x2 or 4x4 right now, but it just always blinks.

 

Tough situation. What exactly is dealer's diagnosis? What did they find as far as the malfunction? Replace transfer case is not a diagnosis, its a proposed solution

 

Did you check if the metallic tubes going to the sensors which are connected with rubber tubes have a hole in them due to rust ?