Which transfer case? That would help...
Since you say it's an 89, I'm going to go out on a limb and assume that it's got the 4.0 as well.
Since you're talking about disconnect, I'm going to have to make another assumption (I really hate doing this...) and figure it's an NP231 with the D30 Disco front.
So, with all that behind us...
The NP231 shifts internally to engage the front output shaft. The axle is coupled with a vacuum actuator found on the backside of the long (passenger) tube, and vacuum to the actuator is switched with a unit on the transfer case. There are three vacuum lines, two on one side of the diaphragm and one on the other.
The single line is the "disengage" - it pulls the vacuum actuator so that the collar uncouples the aaxle shafts, and (I'd have to check) exerts a slight pull to keep the axle from accidentally engaging.
The other two work on the "engage" side - one is the vacuum supply from the tcase switch, and the other (which opens when the axle is fully engaged) supplies a vacuum signal to a switch near the surge tank under the hood, which is what turns the indicator light on and off.
I have found that, from time to time, the little actuator gets crapped up after a while, and wants to be cleaned. Do it thusly:
Place a drain pan under the vacuum actuator, and remove the (four?) bolts that hold it on. Disconnect the vacuum hoses, and remove the actuator. Clean the mating surfaces on the axle and actuator motor while you're down there. Note the position of the fork as you remove it - it will need to be there when you put it back.
Take the vacuum motor to the bench, get another drain pan, and a can of carburettor cleaner with the little red straw. Pointing everything AWAY FROM YOUR FACE, insert the straw and spray solvent into the actuator. Use the fork on the actuator to work the diaphragm back and forth. Clean both chambers, and all three ports.
Apply a LIGHT coating of RTV Black (or Red - but that Blue stuff isn't worth a damn!) or LocTite 518 Gasket Eliminator to the mating surface on the actuator, slip the fork back into position, and install. Tighten bolts to German specifications - "gudentight."
Clean the vacuum lines and reconnect. Verify operation.
I've done this a few times (got three RENIX XJ's with NP231...) and it takes me about 20 minutes to do it all. Not too bad - I just do it everytime smog rolls around automatically now, so it gets done every two years.
Of course, if you have the NP242, this means nothing, the front axle doesn't disconnect, and the lights are electrically-switched by the transfer case. How can you tell?
NP231 shiftgate bezel reads:
2HI
N
4HI
4LO
NP242 bezel reads:
2HI
4FT
N
4PT
4LO
5-90