It's strictly a mechanical thing with regards to a manual transfer case.
If it's not a problem with achieving FULL distance and engagement with the shift lever, then it would seem apparent that you have broken gearing or possibly pins, press fits or shaft keys (whichever secure the mechanicals internally), is my assumption.
Do you have high range and not low (or vice versa)?
Does placing the transfer case shift lever in NEUTRAL disengage the REAR axle?
(trying to establish if an internal selector
lever problem here)
Did you notice any noises / problems leading to this current situation?
Any history of changing out the gear oil? (or NOT).
