I have a 1996 E 320 and when the car is running and I turn on the headlights the message Lamp Defective appears across the console, but all lights work. What is causing this message.

Maybe a lic. plate lamp?

Yes, look for license plate lights.
Also, if a wrong wattage bulb was ever put into a socket, that could be the problem. Each bulb needs to be the EXACT specs that the manufacturer has them set as. Also, check and replace all exterior light related fuses. There could be a hairline crack undetectable to the naked eye.
Good luck.

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2006 E350 w/ 155k miles (Daily Driver)

Previous:
1993 300E 3.2L Sedan w/ close to about 300k miles
2003 E500 Brilliant Silver (Had 217k miles when totalled!)
1989 300E with 289,000 miles (had for <1 yr while in HI)
03 CLK 500 cabrio (Mom's)
2006 C230k (Dad's)
1999 S420 (Mom's/Dad's)
2000 C230k Sport sedans
2001 CLK320 Cabrio (Mom's)
1995 C280 My First Mercedes-Benz... (155k miles. EXCEPTIONAL AUTOMOBILE. Was Very hard to let go of!)

...license plate light as well. My lamp-out warning light kept coming on as well. All the lights checked out OK and it was driving me crazy, until I looked at the reflection on the rear chrome bumper. It was only then that I saw that one of the license plate lights was out.

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Current Benzes

1989 300TE "Alice"
1990 300CE "Sam Spade"
1991 300CE "Beowulf" RIP (06.1991 - 10.10.2007)
1998 E320 "Orson"
2002 C320 Wagon "Molly Fox"

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