Anyway, at least I believe it is a knock. At first I thought it was Piston Slap in the motor. A Subaru Mechanic told me piston slap was not common with these motors.   It is a 1988 Subaru GL 4 wheel drive wagon.  It has the selective 4 wheel drive. It is not full time 4 wheel drive. The knock is most noticeable when cold and then gets better as it warms up. This happens when it is in 2 wheel drive.   When I shift it into 4 wheel drive the knock disappears completely. Yes, I checked the oil and it is not discolored and does not leak.   Any ideas out there? 

Drive shaft U joints on front half of rear drive shaft

Dang, Ivan... you're good. 

  Ivan, can you explain why the knock goes away when it is IN 4wd?  The rear drive shaft does still spin when in 2wd.

Carpyblue... you let us know if/when you replace the u-joint.

If the shaft is under a load, it might bind up enough to quiet the knock.

 

Is the knock only present while in motion, or does it occur when stopped as well?

 

John

In 2wd the shaft is non loaded so it turns with diff but not with 4x4 gears so you can hear the shaft rocking on Ujoint when in 4x4 the shaft is loaded by 4x4 gears keeping Ujiont under constant load making noise stop.

I will check the u joint. The knock only happens when it is in motion and in 2 wheel drive under load. No knock when it is stopped or coasting. I forgot I posted this, too many other things going on here, I appreciate the answers, thank you.

Tis, indeed, your u-joints. I went through this same problem just before moving from Colorado to yuc....I mean loverly Florida. Only mine was more like someone swinging a hammer at my tranny when I would put her into reverse, lol. My joints were shot, bought new ones from Advance and then found a nearby driveline shop to install them. I think I paid $50 to have the old pressed out, new ones put in, lubed, and the whole assembly balanced, even. Dead quiet now.