Transfer Case output shaft moves up and down

[Mississippikid]

I have a 2000 Silverado Z71 4x4. It makes a roaring and grinding noise when i engage 4 wheel drive after truck warms up. When cold it works fine. Checked fluid levels in both transfer case and differential, there ok, while checking u-joints I noticed output shaft in transfer case moves up and down, also play inside transfer from side to side. Anyone know what my problem might be? Thanks

[tlentzsr]

Sounds like the transfer case is going bad...mine did. Cost over $1500. I treated truck like baby ... no fast get aways etc. so puzzled why I had the problem. Coating on my gears came off and overheated. Leaked oil like a sieve.

[600mxz]

My truck has same symtoms mentioned above but at this point its up and down. I'am guessing there is a bearing that on its way out and can only be repaced by splitting the cases?
Thanks