In almost every instance, when the seal in your Chevrolet truck leaks where the driveshaft enters the automatic transmission, the extension housing bushing has failed and the driveshaft has too much movement. This movement damages the bushing and allows fluid to pass through the seal. Replacing the seal is not enough; you must also remove the housing and replace both the bushing and seal. The procedure applies for every automatic transmission Chevrolet uses in its truck line.
Jack up the rear of the truck, and install jack stands under the frame rails. Lower the truck. Use a wrench to remove the four rear driveshaft mounting bolts that hold the driveshaft in place. Lever the driveshaft out of the rear yoke with a large screwdriver. Wrap the bearing caps on the universal joint with masking tape to hold them in place, which will prevent the caps from coming off and scattering needle bearings.
Slide a drip pan underneath the transmission output shaft where the driveshaft splines into the transmission. Remove the driveshaft, and set it aside. Loosen the four extension housing bolts with a 3/8-inch socket, and pull off the extension housing.
Drive the rear seal off the housing using a shop hammer and flat-blade screwdriver: Drive down on the outer lip and lever up to unseat the seal. Place a bushing driver into the tail shaft opening, seat it on top of the bushing, then drive out the old bushing.
Reinstall a new busing by fitting it onto the bushing driver. Drive the new bushing into place with a shop hammer. Install a new seal using an appropriately sized seal driver. Remove the tail shaft gasket or O-ring, and replace it with a new one. Install the extension housing, and use a 3/8-inch socket to tighten the four bolts.
Reinstall the drive shaft into the extension housing. Remove the masking tape, and seat the rear universal joint into the yoke. Install the U-bolts and nuts and use a wrench to tighten them. Lower the truck, and start the engine. Check for transmission fluid leaks, and top off the fluid level.
