What could cause a grinding noise coming from transfer case and one time actually slip out of drive gear to neutral on transfer case 1995 suburban?

By the time that happens... well even not telling us the make year or model .. or engine size, or how long it's been happening, or anything else about the vehicle. Once your experiencing these symptoms, it's too late. Your transfer case is gone, you need a new one. Go buy one, and have it installed.. or do it yourself, but your going to get hurt.