4wd indicator light is on but is shifted into 2wd

It sounds like you are experiencing an issue with the 4WD system on your 2001 Chevrolet Blazer. Here are a few things you can try to troubleshoot the problem:

1. Check the fluid levels in the transfer case and the front and rear differentials. Low fluid levels can cause issues with the 4WD system.
2. Make sure that the front and rear driveshafts are properly connected and not damaged.
3. Inspect the 4WD control module and wiring for any damage or lose connections.
4. Check for any error codes using a diagnostic scan tool. This may help to identify any issues with the 4WD system.
5. If the issue persists, it may be necessary to have the 4WD system inspected and repaired by a professional mechanic.

I hope this helps! If you have any additional questions or need further assistance, don't hesitate to ask

Turn on the vehicle.
Hold the brake petal down.
Shift into neutral.
Pull the 4WD lever and shift into 2WD High.

On the transfer case
Transfer Case - Electronic Shift
The four-wheel drive electronic shift-on-the-fly feature electrically shifts the vehicle transfer case between 2WD, 4WD HIGH, and 4WD LOW. The system mode is selected by the operator through the mode select switch (MSS) on the instrument panel. The operator is informed which mode the system is in by two instrument cluster indicators: one for 4WD HIGH which appears as 4WD, and one for 4WD LOW, which appears as 4WD LOW. Shifts into 4WD HIGH can be made at any speed. When shifting into 4WD HIGH with the vehicle stationary, tooth blockage may occur preventing shift completion. When the vehicle is driven above 8 km/h (5 mph) the shift will complete. When shifting in or out of 4WD LOW, the four-wheel drive (4WD) control module requires that the vehicle speed be less than 5 km/h (3 mph), the brake pedal be applied, and the transmission be in NEUTRAL (automatic transmission) or the clutch pedal be depressed (manual transmission).
The gearmotor encoder assembly is mounted externally on the transfer case. It drives a rotary cam which moves the mode fork and range fork within the transfer case between the 4WD HIGH, 4WD LOW, and 2WD range positions.
The four-wheel drive (4WD) control module controls the gearmotor encoder assembly that shifts between 4WD HIGH, 4WD LOW, and 2WD modes.

The actuator on the transfer case has a ground short. This is why the light is on. And it will try to shift back and forth, if you have the switch at 2wd.

my durango requires me to reverse several feet before it dis engages. i have owned a few and they all do it just back up and it will go back to 2wheel no problem

As I recall the 96 blazer had electronic shifting for 2wd to 4wd. There should be a small panel on the drivers dash buttons for 2wd, 4wd lo and 4wd hi.

Simply press the desired button while stationary and if the system is functioning properly then it will shift and the light for the engaged type of drive will be lighted. Generally you would like to be in 2wd for this vehicle.

can you hear the shifter motor trying 2 shift? if not its the shifter motor open the door and try 2 listen when your trying 2 shift it

sounds like it might be an encoder moter, but the best thing you can do is take it to a good transmission shop so they can hook up their reader and find out for sure

When you are finished with your 4 wheel drive,put the transmission in neutral, disengage 4 wheel drive and shift to reverse then back up a couple feet before shifting to forward gear.

check switch , fuse and relay if good check cable hoses and wiring at transfer are not damaged or disconnected -check actuator for proper movement actuator has a tendency to stick lube actuator rod if necessary