Fluid

• The transfer case in your Jeep Cherokee is chain-driven and requires automatic transmission fluid (ATF), as opposed to gear oil, which is found in gear-driven cases on larger vehicles. Use the Dexron-Mercon formulation only, and keep your eye on the level regularly. The ATF not only lubricates the inner workings of the case, but it also cools the unit. An overheated transfer case will let go quickly.
  
  

Linkage

• If the linkage becomes bent or broken, then the transfer case may have a difficult time shifting into and out of four-wheel drive. If the case is experiencing shifting issues, inspect the linkage under the vehicle for bends, binds or breaks. Parts are readily found at the local off-road , auto parts store or junkyard.
  
  

Chain

• The chain inside the transfer case has a great deal of stress on it. Over the years, they will stretch. When they stretch, they begin to skip teeth, which will make loud banging or popping sounds and prevent the Jeep from moving quickly when four-wheel drive is engaged. This issue requires removing the transfer case and either rebuilding or replacing it.
  
  

Vacuum

• On some models of the Cherokee, the four-wheel drive is actuated via vacuum pressure when the transfer case is shifted into 4x4 mode. If the lines have aged and cracked or broken altogether, the Jeep will not be able to get into four-wheel drive. Inspect the lines running from the case to the front axle on a regular basis, especially if your rig sees trail action.
  
  

Housing

• The housing on the transfer case in your Jeep Cherokee is made of magnesium, which is a soft metal compound. If the transfer case hits something hard like a rock on the trail, the outer shell can become damaged easily. A crack or hole in the casing will surely result in a major fluid leak and put the Jeep out of commission. If the casing cracks, an entire transfer case swap will be necessary.