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2003 chevy trailblazer_lt_ext
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Did you try to set it to 2HI when shut off and see what happens? When I was having similar issues a few years ago, that always got me back to 2HI.

I can see one of two things, either the encoder motor is bad (which was my issue a few years ago), or you simply need to change your transfer case fluid. I'll save the rest for Roadie to comment on. He can tell you a whole lot more than I can about this.
 
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