A vehicle driveline with an axle assembly having an input member, a first output member, a second output member and a power distribution system that includes a transmission and a differential. The differential has first and second differential outputs. The first differential output is coupled directly to the first output member. The transmission is configured to control rotary power transmitted through the differential to the first and second output members. The axle assembly is operable in a first mode, which has no effect on a torque transmitted from the second differential output to the second output member, a second mode, which reduces the torque that is transmitted from the second differential output to the second output member, and a third mode that increases the torque that is transmitted from the second differential output to the second output member.