Transfer case cover installation?

Yep, a shaft or bearing is not seating into the case like it should you may need to spin the output shaft while jiggling the case, most of the time when this case is installed the transfer case is drop horizontally onto the unit while helps (square up) the shafts and bearings so they don't get hung up. Also, make sure the shafts are fully seated into the main frame of the case because sometimes they can pop out and cause this issue as well. Please upload pictures or videos in your response. Check out the images (below).

Thanks for your response. I will give it another try today and verify the shafts as you suggested, but I do not believe the shafts move on this particular vehicle but will take a closer look.

Just to update you. I worked on this again today and was having the same issue. I was about to give up but there was one last thing that I had not tried and that was to ensure one of the gears was not installed backwards. Looking at the gear it appears that it is identical in either direction, however, I flipped it and this solved the problem. I was able to complete the job. I really appreciate you responding with your advice. Thanks.

Good eye, thanks for letting us know. We are here to help, please use 2CarPros anytime.