BMW Diesel Transfer Case Symptoms, Owners Report?

Had a similar issue with my '07 BMW 3 Series 320d last year. Started with jerking and rough gear changes, followed by multiple warning lights. Initially thought it was just transmission-related, but turned out the ABS sensor was failing, which triggered a chain reaction affecting multiple systems. The faulty ABS sensor messed with the car's ability to properly manage power distribution, causing the transfer case to act up. Since these systems are interconnected, one fault can cascade into what seems like multiple problems. The AWD error you're getting is a typical symptom when the ABS system isn't communicating correctly with other modules. In my case, replacing the ABS sensor and recalibrating the system fixed the jerking and transmission issues. The mechanic also had to clear all the fault codes to get everything back to normal. It was actually less serious than I initially feared, though the diagnostics took some time to pinpoint the root cause. Would definitely recommend getting it checked by a BMW specialist who can properly diagnose the ABS system first before jumping to conclusions about the transfer case.

Thanks a bunch for sharing your experience! That's actually really helpful, sounds exactly like what I'm dealing with. Quick question though: do you remember roughly how much you ended up paying for the whole thing? Also, has everything been running smoothly since the repair, or have you noticed any other quirks pop up?

Great news, since I had that work done on my BMW 320d, it's been running perfectly! The mechanic confirmed it was exactly what I suspected: the ABS sensor issue triggering that annoying transfer case limp mode. Here's the best part, the repair ended up costing me absolutely nothing because it was covered under an existing service agreement. Talk about lucky! Haven't had a single warning light or any weird behavior since then. The transmission shifts like butter now, and all those interconnected system errors completely disappeared. It's like having a different car, in a good way! I know how nerve-wracking these issues can be, especially with BMWs, but once they found the root cause with the ABS system, it was pretty straightforward to fix. If your symptoms are matching what I experienced, you're probably looking at the same issue. Let me know how it goes after you get it checked out!

Thanks! Just wanted to update you, I took your advice and got the car checked out. You won't believe this, but my mechanic found exactly the same issue! The faulty ABS sensor was causing all that drama. Got it fixed last week and the difference is like night and day. Had to shell out about €600 for the whole job, parts, labor, and diagnostic fees included. Not cheap, but way better than replacing the transfer case, which is what I was worried about. The car's running smooth as silk now, no more jerking, warning lights are gone, and the gearbox is shifting perfectly. Really appreciate you sharing your experience. Saved me from potentially spending way more at my old mechanic who was convinced it needed major transmission work. Sometimes it pays to ask around!