I have a 2000 Blazer ZR-2 with 160K miles and I recently noted a low growl which I think is emanating from the transfer case. Concurrently, the mileage dropped from 17mpg to 13 mpg based on the on-board trip computer. However, when I shift (push the button) into 4wd (on a wet road) my mileage goes up to 17 mpg. I tested the 4wd on snow and found that only the rear wheels spun in 2wd and all four spun when in 4wd. What the problem?

 

Your front axle is not engaging or partially engaging
There is a vac switch on the tcase that is prolly bad/leaking