Yep, its the transfer case.

Just had my truck in at the dealer for the same issue, was fixed under warranty.

I didn't get a detailed description from the service department. If i remember correctly they said it was due to a stuck or defective bearing inside the transfer case.

 

Ding! Ding! Ding!
"Transfer case is the answer Bob, tell him what he's won!"
It was a bearing in mine too. The bearing went out, took out the cam, and they think it took out an actuator, (still looking at ancillary parts). The Service Manager said its a "known" potential weak point and the new parts are redesigned. And while they're at it, lube my slip yolk. Now, whether I can get it back before the hurricane hits is another problem all together.

 

Thanks and Ouch. I'll be headed to Ford in the morning and see what they say.

 

How do the hubs on these F150s work? Vacuum pulse keeping them unlocked while running? Do they stay locked in when the truck is turned off then?

 

Just left the repair shop for a diagnosis. Truck is throwing codes that indicate a lack of communication from the dash to transmission, so to speak. I didn't get into any detail as to what exactly the codes were. We almost didn't get it out of the bay because when recreating the problem, the truck wouldn't got back into drive mode. In other words, I was in 4lo on the knob and displayed in the dash, yet with the truck jacked up, all 4 wheels were free to spin, and the transmission was in drive. When we tried to reengage 4hi or 2wd, nothin! when had to fiddle with knob on the dash and keep putting it in D the R then D. We were finally able to get it into 4hi and i could drive off. While driving it I was able to get it back into 2wd. Unfortunately, the rental guy left before giving me a loaner! Now I have to back again tomorrow night to drop it off... Sorry, venting on that one. 3 weeks, I've had it 3 weeks. Not a good start. Other than that, I saw the eclipse today!