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I've got an 89 cherokee and when bought it was stuck in 2wd. Make sure it's in park and put some blocks in front and behind the wheels to keep it from rolling. Have a friend slowly move the 4wd lever from 2wd down to 4lock, then 4high, then neutral (even if it's in park the vehicle will roll if the transfer case is shifted to neutral...make sure there is something preventing the vehicle from rolling), after neutral on the 4wd level is 4low range. Be underneath the vehicle while your friend is moving the lever and watch near the driver side of the vehicle right next to the transmission pan. You will notice a part of linkage moving as your friend moves it. That linkage is connected with a tiny clip to another part that goes to the transfercase. Make sure it hasnt slipped out. If it has you will need to find a "C" or "E" clip to hold it in place and possibly replace the bushing. If your problem is the same as mine then it should only take 15-30 minutes to fix.
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