A hydraulic coupling for use in an all wheel drive system, utilized in association with a front wheel drive transaxle, including a multi-plate clutch assembly operably connecting two relatively rotatable members and an actuator assembly for actuating the clutch assembly in response to speed differentiation between the two rotary members. The actuator assembly includes a hydraulic pump, a piston disposed in a piston chamber, and a fluid distribution system including a first flow path for supplying hydraulic fluid from a sump to the hydraulic pump and a second flow path for supplying hydraulic fluid from the hydraulic pump to the piston chamber. Hydraulic pressure in the piston chamber controls the magnitude of the clutch engagement force exerted by the piston on the clutch assembly. A control valve assembly is located in the piston chamber, in close proximity to the clutch pack where a majority of heat is generated.