A power transfer unit is provided with a torque limiting assembly that limits the torque transferred to driveline components when torque peaks occur. The power transfer unit can include, a first shaft, a second output shaft receiving drive torque, a second output shaft, and a torque transfer mechanism. The torque transfer mechanism includes a coupling member and a biasing member. The coupling member is located between a driving member and a driven member and provides selective engagement therebetween when in an engaged position. The driving member and/or the driven member includes a recess therein receiving a portion of the coupling member when in the engaged position. The biasing member urges the coupling member and the driving member and/or driven member into the engaged position.