I have a 1996 Legacy Outback 2.2 Liter with manual transmission.

I was in the middle of my commute in cruise control.  The traffic ahead

slowed and right as I took it out of cruise control to decelerate, I noticed
out of the corner of my eye that the speedometer needle went straight to zero
and stayed there.  Otherwise, nothing unusual occurred  and there were no symptoms whatsoever. 
After a few minutes, the check engine light came on.

After I got home, I plugged in a code reader at the auto parts store and the code
as described in the topic title appeared.  I cleared the code and drove
home.  The speedometer still does not work, but the check engine light has
not come back on again (only a few blocks).

I'm guessing that I just need to buy the Vehicle Speed Sensor that screws
into the transmission much like where you used to screw in your speedometer
cable in the olden days.  I see them online for around 100 bucks.

 

I searched but didn't readily see a similar issue or a direct answer to my
question.  So I figured I would check here first before spending a hard earned
$100 without fixing the issue.  Any help is greatly appreciated. 
Thanks.

 

http://www.ultimatesubaru.org/forum/topic/115677-p0500-repair/

 

The easy option is to hope that is your problem. Pulling the gauge out isn't a big deal.

 

One does not simply replace the VSS.... They are a royal pain in the butt. It has terrible access, and it's plastic threaded into aluminum, with red loctite. Thanks subaru. Check wiring, the gauge and everything else before dealing with a vss replacement. The last one I did was during a rally service, and I ended up breaking it off, melting it with a torch and picking it out in pieces... But I had a half hour time constraint...

 

The one you have pictured is a two wire, 96 will be a three wire, but yes. That's the vss.

Thank you for the response.

 

My vss is two wire.  I read up on it some more.  First I unhooked the electrical connector, then hooked up some speaker wire to the connector and ran it through the window so that I could read the voltage as I was driving down the road with a multi-meter.  With the meter set on AC, it wasn't reading any significant voltage.

 

So then I removed the vss from the transmission.  It wasn't that hard to get out as it had recently been removed and reinstalled when I swapped transmissions.  I hooked it up to a drill motor and it again was not reading any significant voltage with the multi-meter set on AC.

 

That pretty much proves I have a bad vehicle Speed Sensor, correct?