Good Morning,
My 06 Liberty CRD has an odd transfer case issue.
It seems to be properly shifting in and out of the various four wheel drive modes, as I can tell by the varied driving characteristics of the vehicle. But the indicator light on the dash is reporting incorrectly. When in 2 wheel mode, it reports part time 4x4, when in full time 4x4, it reports 2 wheel mode. 4lo is accurate.

Ideas?

Common problem. transfer case position switch is broken or out of alignment. Its just an indicator. It will sometimes correct itself the next time you shift. Otherwise you need to pull the console apart to reposition or replace the switch.

Mine was off by one position for 3 months, eventually fixed itself and I haven't had an issue for 50k miles.

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2005 CRD "Ol' Blue"
Red Ryder carbine-action, two hundred shot range model air rifle with a compass in the stock and this thing which tells time.
My build page- RL Komodo Rear and TJM Front Bumper, armored, lifted, JBA Steel D30, 4.10s and ARB air lockers.

PN 5083138AA I think. See viewtopic.php?f=3&t=59788

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Sold to LOST member my 05 Ltd, GDE Stg II turbo + TCM tune, SunCoast TC w. Transgo kit, Steiger window regulators, Samcos, Fumoto valve, 2nd gen filter head with Lub. Spec. bleeder, Hayden clutch & 11 blade fan, inverted spare, P-1 battery, BF Goodrich Long Trail TAs, Etecno1 glow plugs, timing belt at 50K miles/8 yrs

I had this problem. It was a position switch. I believe it is a jeep only part = $$$

Good luck
KJJET

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05 Liberty CRD Sport with Leather 115k
GDE ECO, No EGR, no FCV, (system gone)
Oil Drain plug P/N 090-039
K&N Air Filter, 2nd gen Fuel filter head
NEW Rockers & lifters
Mobil 1 0w-40
Stant 13519 195 deg inline Thermostat.
0 281 002 845 MAP
Etecno GX3123 7v Glow Plugs
Advance Gold 800CCA Battery
Traded it for a Quality VW TDI

You guys are awesome. Thanks a bunch.