I have a '98 Legacy Outback wagon 5 speed with a strange noise coming from the back end. It sounds like a cross between gear whine and a grinding noise. Seems to be at the right rear and it only happens when decelerating (engine braking). Pushing in the clutch pedal makes it stop, and giving it more gas makes the noise stop too. Just had the RR wheel bearing replaced, but I think this is not related. I had noticed this noise before wheel bearing trouble started, but now that the bearing is fixed, I can hear it again. New brakes front and rear had no effect. Anyone have any ideas?

I don't know what it is but my 98 OB has the same noise, and I just had the RR bearing replaced for the second time in 12 months. Luckily the dealer covering the second under warranty.

 

Mine has 140,000 on it. I also had the transfer gears replaced in the back end recently, they were locking up causing the car to jump like a 4X4 on dry pavement.

 

I'm going back Thursday for them to take another look.

I finally found the problem! Anyone who has the symptons described above, read on. The rear differential moount is a pretty big chunk of metal that has cross members reaching out to the edge of the car and they are bolted to the chassis near the rear jacking point. The end of the cross member has a rubber vibration isolator bushing inside it and it rests on a small bracket (5" x 7"?) bolted to the frame. Apparently, the bushing had settled a little and now the crass member would contact the support bracket when shifting or decelerating due to the driveshaft torque. I found it by going under the car and banging on stuff until I found something that made the same clunking noise. The bushing does not look easy to replace, so I put two washers in between the bushing and the support bracket and the noises are gone. Note that the washers must have a inner diameter small enough to support the bushing liner, and an outer diameter smaller than the cross member piece.