My son has a 1995 4 runner with a 3.0 and automatic transmission. The vehicle does not have manual hubs. If we shift the transfer case into 4wd the dash light comes on but the front diff does not engage. If we shift the transfer case into low range it definitely goes into low range but there is no low range indicator light and the front diff is still not engaged. We bought it used and I believe it had sat for a few months without being driven before we purchased it. I am thinking it is likely a vacuum or electrical sensor on the front diff but was wondering if anyone here had a similar situation to start us down the right path to get this fixed. We live in central PA and fortunately winter has been mild so far but I would really like to get this fixed for him so we can go do a little wheeling and he can try to follow me in my 94 landcruiser.

 

The green 4WD light is activated by the ADD (automatic differential disconnect) switch, which shouldn't close until the ADD collar is actually engaged. So, you apparently have two problems. One, the ADD is not engaging, and two, the 4WD light is lying to you about that.

So, first things first; figure out why the ADD isn't engaging.
1) with the engine idling, switch the transfer case from 2wd to 4wd and back. You should (a) hear the ADD relay click under the dash, and (b) a listener should hear the vacuum solenid valves click on the right front fender.
If those parts don't work, you'll have to troubleshoot the electrical. I've attached a wiring diagram showing the pertinent parts circled in red. Note that the ADD relay may say "Horn relay" on the body. Don't let that confuse you. Just track it down by the appropriate wire colors.


2) If those parts work, check the vacuum lines. With the engine running, make sure there is vacuum going to the vacuum solenoids. Then pull off the output hoses from the solenoids and check to see if vacuum switches from one to the other as you shift from 2wd to 4wd.
3) If things are good at the valves, do the same tests with the vacuum hoses at the differential.
4) If all of this checks out, you'll have to pull the ADD cover off the diff and see what's going on in there.

I've also attached a section from the FSM of the front diff ADD system which may help you.

 

It should not be possible for the 4 wheel drive indicator light to light without the ADD shift collar being engaged.

There is good reason to suspect that the front differential, or transfer case is damaged.