What could cause a clunking in the drive line of the transfer case when making sharp turns in 94 jeep grand Cherokee?
Possibly bad universal joints.
Otherwise there are a few other things on the axle to check that can make turning noises. Check wheel bearings, ball joints, and the CV or U joints (whichever yours has) on the axle shafts (not the drive shaft). To check the wheel bearings and ball joints jack up the on the axle and try and move the tire back and forth in the opposite directions that the wheel turns...so push in on the top and pull out on the bottom and back and forth. There should be absolutely no play here...even a little "chunk - chunk" back and form means something is worn out and needs to be replaced. If its a ball joint (the two big greasable joints on the top and bottom of the outer axle) bring it to a shop. In U joints you should be able to see the play in them if you try and rotate the tire back and forth (again with the wheel off the ground or somebody inside going from drive to reverse but make sure its not somebody that will run you over!). There is a little movement from the differential in the axle but there shouldn't be any in the axle joints.