The compact, all-gear full-traction differential includes meshing pairs of side-gear worms and worm-wheel balance gears having a "hybrid" design. Preferably, the teeth of each side-gear worm have an involute profile but are cut with only plunge feed, while the teeth of the worm-wheel portions of the balance gears are helicoid worms having tip and root modifications made by a concave-shaped cutter. The side-gear worm teeth have a helix angle equal to or greater than 45.degree. and significantly chamfered ends, and the gears are designed to provide a gear ratio between 1.5:1 and 2.5:1. The numbers of teeth in the spur-gear portion and worm-wheel portion of each balance gear and in each side-gear worm are all divisible by 2 or by 3, preferably by both 2 and 3.