Two problems related to transfer case have been reported for the 2006 Chevrolet Avalanche. The most recently reported issues are listed below.
Driving down the road the truck engine will be running with no abnormal sounds, smells, leaks but will act as if not in gear. Rpm's will rev but truck will not move. Only after putting truck in park (lots of grinding noises) then pressing the 4wheel button then back to 2wheel (sometimes through two cycles) the truck will back into gear and operate properly. Took it to a transmission shop put it on the diagnostic machine and no error codes were given to give reason why the transfer case disengages randomly. Replaced the transfer switch per shop recommendation "just in case"it was okay for about a month then once again issues started again just the same as before.
2006 Chevrolet Avalanche 1500 4wd in 2wd hi, driving at 55 mph with transmission in d, engine revved freely as if transmission in neutral. Coasted to a stop onto shoulder, shifted into park, released foot brake, vehicle began to roll forward (downhill), apparently because transfer case shifted into neutral. Ses indicator not on. Turned off engine. No codes (had code reader in glove box). Turned engine on, shifted transmission into d and felt transmission engage (apparently, transfer case had engaged from neutral). Accelerated gradually and drove down highway for 1/4 mile and when accelerator pedal was released, transfer case shifted into neutral, again, engine revving freely with transmission still in d. Coasted to a stop on shoulder, pressed 4wd hi and felt transfer case engage, pressed 2wd hi and felt transfer case disengage but now in 2wd hi instead of neutral. Accelerated gradually and drove down highway and when accelerator pedal was released, transfer case shifted into neutral, again, engine revving freely with transmission still in d. Coasted to a stop on shoulder, and repeated above sequence on transfer case to shift into 2wd hi. Shifted transmission into 3, accelerated gradually and drove down highway, transfer case remained in 2wd hi. Slowed down to a stop on shoulder, turned off engine, restarted engine and shifted transmission into d, accelerated gradually and drove down highway and when accelerator pedal was released, transfer case shifted into neutral once again. After coasting to a stop, repeated sequence to engage transfer case into 2wd hi, shifted transmission into 3 and drove vehicle to mechanic. Still diagnosing issue.