If installing new Transfer Case Yoke Seal, do so now. Seal should mount flush with housing. Grease inside of the seal.
Apply a thin film of grease to the yoke where the seal will ride.
This groove is where the o-ring seats. It prevents the oil from seeping out of the splines.
Install the o-ring into the groove as shown. The O-ring is only needed on FRONT output because it is below the full oil mark.
Install the Flat Washer (re-used from the old yoke).
Install the nut and tighten down. The nut must be tight for proper preload of the bearings. Per the Ford Truck Shop Manual, this nut should be about 125-150 ft/lbs.
transfer case yoke installation instructions