A transfer case and transmission are designed to permit the transmission hydraulic control system to control a range selection coupler and a torque on demand clutch in the transfer case. Two pressure circuits are transmitted from the transmission to the transfer case: a high range circuit and a low range circuit. The low range circuit is pressurized to engage low range while the range circuit is pressurized to engage high range. The torque on demand clutch is controlled by whichever of these circuits has the higher pressure. Lubrication is provided to a front section of the transfer case via the transmission output shaft, with the fluid returning to the transmission sump through a drainback passageway. The rear portion of the transfer case has a segregated sump. A control strategy is employed to partially fill front section of the transfer case with fluid in preparation for vehicle towing.