The aim of this study is to design and manufacture a multi-plate clutch system that uses magnetorheological (MR) fluid control to allow for a variable power transmission ratio in power distribution systems. MR fluid is a smart material that enables presenting a solution to the shocks and power loss that occur due to mechanical problems in power distribution systems. As such, the longitudinal and lateral dynamic properties of 4WD (four-wheel drive) vehicles were examined and analyzed to develop an algorithm to control the front/rear power distribution according to the road surface state and driving conditions. To verify the algorithm, the CarSim vehicle dynamics simulation program was adopted to perform experiments to understand the vehicle’s dynamic performance improvements and turning stability via a HILS (Hardware in the Loop) system. In this study, an MR fluid, multi-plate clutch was used that combines a dry clutch and a wet clutch using the characteristics of the MR fluid. Such a clutch was designed to enable continuous and smooth torque transmission by utilizing the strengths of each of the dry and wet clutches. The CarSim vehicle dynamics program was used to conduct the experiments, which were conducted by linking to the manufactured MR fluid clutch experimental device. The experiments investigated the dynamic performance based on the power distribution ratio by performing longitudinal flat, inclined driving and lateral DLC (double lane change) driving. In summary, this study found that it is possible to perform power transmission by applying a current to an MR fluid and forming a magnetic field to change the flow properties of the fluid to control the torque transmission ratio that occurs in an MR fluid clutch.