A method for controlling operation of a transfer case in a motor vehicle driveline that includes by an engine controlled by a throttle having a variable position, and a transmission driveably connected to the engine for producing multiple ratios of the speed of a transmission input relative to the speed of a transmission output. The transfer case transmitting rotating power in response to an electric signal applied to a clutch. The method includes determining that the engine throttle position is less than a first reference throttle position during a period of predetermined length; determining that a speed of the vehicle speed is in a predetermined range; determining that the transmission is operating in a speed ratio greater than a reference speed ratio; determining that the engine throttle position is greater than a first reference throttle position; and increasing the torque capacity of the clutch for a predetermined period.