Originally Posted by JSBriggs
You need a new output seal, and a couple cans of brake clean. Be sure to clean/polish the sealing surface on the output stub, and smear it with grease before installing the new seal.
Get the double lip version of the seal. The survival of the seal depends upon getting the end play of the output shaft correct. That is set by the shims between the transfer case and the speedometer housing. The workshop manual will walk you through it step by step.
When you have the speedo housing off you will notice a vertical slot going down from the back of the seal. This slot is to allow drainage of any seepage past the seal so it does not soak the parking brake. Be sure this slot stays open when you reassemble everything.
If you do not have a workshop manual get one. It is well written and essential to have for long term ownership.
Basically you remove the rear prop shaft, mechanical brake parts, speedo housing being carful not to loose of damage any spacer shims to get at the output seal.