Recent developments in front wheel drive based all-wheel drive (AWD) systems have focused on the disconnection of the secondary driveline to provide a high efficient 2-Wheel Drive (2WD) mode in order to minimize parasitic losses and increase fuel economy when all-wheel drive is not required. This present study compares a base on-demand all-wheel drive system without disconnect features to one with disconnect features in the rear drive module (RDM) and power transfer unit (PTU) to fully disconnect the secondary drive line.In order to further reduce parasitic losses the RDM also utilized an on-demand lubrication system. In conjunction with the active lubrication system, the oil sump level was reduced to assure all clutch housings and their associated plates were above the oil level at all times in order to minimize shear losses. Positive plate separation was also employed to assure ample clearance for free-running clutch plates.Essentially, the tested disconnect system represents the best possible configuration for the reduction in unwanted parasitic losses and their deleterious effects on fuel economy while enhancing the traction and vehicle dynamics performance benefits of independent side to side torque transfer control.Vehicle data shows that the disconnect system increased fuel economy in 2WD mode as compared to the base all-wheel drive system by 3.3% in the FTP75 drive schedule and 2.4% in the Highway Fuel Economy drive cycle. It should also be understood that these fuel economy savings potential represent a 100% 2WD mode duty cycle which is the maximum possible savings. Any AWD mode duty cycle either manual or automatically selected will deteriorate this potential savings under real world driving conditions. The vehicle manufacturer will need to manage this expectation at the consumer level.Fuel economy benefit of a disconnect system is the focus of this paper. Disconnect system response and AWD performance will not be covered.