DEFINITION: An occasional drop of lubricant leaking from the splined yoke is normal and requires no attention.

The slip yoke barrel is burred, nicked, corroded, or worn.

1. Inspect the slip yoke for burrs.

Minor burrs can be removed by careful use of crocus cloth or fine stone honing.

2. If the is badly burred, corroded or worn, replace the yoke.
3. Replace the oil seal. Refer to Propeller Shaft Front Slip Yoke Oil Seal Replacement in Automatic Transmission - 4L60-E or Rear Output Shaft Seal Replacement in Transfer Case.

There is a faulty transmission or transfer case output shaft oil seal.

Replace the oil seal. Refer to Propeller Shaft Front Slip Yoke Oil Seal Replacement in Automatic Transmission - 4L60-E or Rear Output Shaft Seal Replacement in Transfer Case.