Grinding noise coming from 97 GMC Yukon transfer case

Sounds like your transfer case in neutral. You have to engage the transfer case back into gear then shift selector to drive or reverse. When your transfer is in neutral the transmission will not operate. Good luck.

You must have a manual transmission. Rebuild it. synchronizers are bad. The reason for grinding. Then you have worn shift forks. Reason for popping out of gear. Also replace any worn bearings or just get the bearing kit and replace them all, with the races.

If it is an automatic transmission, first check the fluid level. If it is low, fill it up and try it again. If the level is fine, then there is a bigger issue and you should seek a professional's help.

whats happening is the side gears in your transfer case are worn possible even broken ...whinieing gears are worn grinding gears are when some of the teeth are broken

unfortunately what it sounds like is the transfer case like you suspect. inside are bearings and gears and a chain what happens is the chain will stretch and cause this problem it will actually jump the teeth on the gears, you will need to have the chain replaced in the transfer case. sorry to have to tell you this but i hope it helps.

first gear and/or reverse may be noisy:
Either a torrington bearing or a planetary bearing is on its way out. Trans will eventually die a loud, catastrophic death. Cheaper to rebuild now (saves further damage to hard parts), but requires R&R. It is drivable until it breaks.
Thank you for using fixya and good luck

automatic or manual transmission? if manual then the first gear fork is bent if automatic then there is trouble in the valve body which means that you have to have the transmission rebuilt

Same thing happened to my Denali but it wouldn't go forward, and it made the same grinding noise. It turned out to be the rear end and they replaced it for over a thousand dollars.

your description sounds like the gears inside the the same differential you just replaced.

This could be 1 of 2 Things. Either the Transmission needs Service REALLY Badly or you have a Tooth Broken off of the Gears in the Rear End.