It sounds like the transfer case has broken internally, but to be sure let's remove the unit and disassemble it to see what happened. Here are the instructions in the images below. Remove the drive shafts and linkage, next remove the mounting bolts from the transmission but be careful because the unit is heavy. Let us know what happens and please upload pictures or videos of the problem so we can see what's going on.
Images (Click to make bigger)
Monday, April 3rd, 2023 AT 10:19 AM