A powertrain with a disconnecting rear drive axle generally includes a prime mover including an output that rotates about a rotational axis. A transmission includes an output that rotates about a rotational axis. The rotational axes of the outputs are substantially parallel to a longitudinal axis of the powertrain. A front driveline is operable to direct rotary power from the prime mover to front vehicle wheels. A rear driveline includes a propeller shaft that provides rotary power to a first shaft member and a second shaft member through a pinion and a ring gear. The first shaft member and the second shaft are operable to connect to rear vehicle wheels. A power switching mechanism has an engaged condition and a disengaged condition. The power switching mechanism is operable to direct the rotary power from the transmission to the rear driveline in the engaged condition. A torque transfer device has an engaged condition and a disengaged condition. The power switching mechanism and the torque transfer device in the disengaged condition are operable to only transmit rotary power to the first vehicle wheels. The torque transfer device in the disengaged condition prevents the first shaft member and the second shaft member from back-driving the ring gear and the pinion of the rear driveline. The power switching mechanism in the disengaged condition prevents the transmission from driving the propeller shaft.