My 98 s-10 2WD 4 cyl with 135K miles has been making this grinding noise in the rear. Sounds exactly like grinding from really worn out brakes.

video 1 with drums on
video 2 with drums off

I can't tell where it's coming from. Both sides equal so I'm suspecting differential.
Shop looked at it and came up with bad U-joint and recommended differential service.
I fixed the u-joint. Fluid level ok in differential

 

sounds like the pinion gear in the differential has broken a tooth. Get ready fo replace rear end. When was the last time you checked teh oil in the differential

 

one of the first things I checked. Level was fine

 

Did you open up the pan and look at the gears? I'm betting there is a broken tooth or two or at least they are chipped off somewhere

 

One other thing it could be is bearings. Might be the axel bearing but you'll have to pull it out to check it. and while your doing that check the ring gears and pinion in the differential

 

I'm back and still baffled. I took off the cover of the differential to get a see inside. Didn't see any obvious wear or damage.
Also have what seems to be breaks dragging. Gets worse after driving for a few minutes. Will actually hold the truck on slight incline. Could this be related?

 

I had a similar problem it was a pinion and spider gear issue

 

ABSOLUTELY! its most likely one of the calipres are frozen and bad. Replace calipers and brake pads and make sure to turn the rotors as well.

they are around 42.00 each, might be cheaper where you are. REPLACE BOTH rear calipers, pads and turn rotors. IF this has drums which it shouldn't if its a 98, turn drums and replace shoes and the piston at the top where it pushes the shoes against the drum.

I Think it is rotors though and you just need to replace them.
That growling sound could be also that you have ground into the rotors with the rivets in the brake pads. Replace rotor if it can't be turned and when you buy pads, buy bonded pads not riveted pads.That will save you money in the long run.

 

My uncle whos a master mechanic says it sounds like pinion gear bearings in the differential

 

expensive to fix?