How many miles are on your 4matic? This series vehicle, 1990-1993 anyway, had a problem with the transfer case failing almost like clockwork around the 130,000 mile mark. The 4matic light came on and stayed on in my '92 300TE 4matic at 133,000 and this was the cause. But, because of my love/hate relationship with this car, (love it when it works, hate it when it needs a frequent repair) I paid an independent mechanic $2,500 to replace it. It turned out the left front ABS wheel sensor was also bad, which might also be the cause of the light being on, but likely then it's be your ABS light. But now, with the new transfer case, the wagon once again goes like a tank through snow, slush and ice, especially with the 4 Nokian NRW's, (now called WR's). Better than any SUV for sure!

As for the 4matic fluid, Ottobun is riight, there is a dipstick on the lid. It is vital that the level be full. If it drops, this is a symptom of a bad transfer case and could also be the cause of the light. Oh, and be sure to use only the MB 4matic fluid. Like MB anti-freeze coolant, it's more expensive, but a small price to pay to keep the repair gremlins away. Good luck.

1962 MB 220SEb Sedan
1992 300TE4Matic Wagon
1995 Subaru AWD Wagon