I just adjusted mine yet again. Factory manual covers this but is confusing unless you have GM specific tools.
So I'll help you out the easy way.
Remove shift connection from the manual shift lever.
It's the actual hand shifters link underside.
Place shift selector in the 4 high position.
On the transfer case slide the selector all the way to the back position. Verify by trying to move drive shafts, both front and rear should be locked into 4low btw.
Bring the TC shift selector forward two clicks, verify both shafts are engaged in 4high.
Loosen the connection bolts on shift rod out about an inch both ways.
Connect shift rod back onto manual shifter.
Bring the rear adjuster nut towards the connector.
There must be a gap of .200 gage between the rear nut/connector.....
Or......eyeball the exact thickness of the adjuster nut. It's almost .200 thick.
Make sure you push the manual lever forward when checking the gap. This ensures the hand selector inside is against the stop..
Ok now tighten the front nut towards the back nut.
You should be pretty much dead on.
Verify you have all your gears.
Double check for tightened nuts.