Do a search, there have been lots of other threads on this.

If I remember correctly, you have to turn the key to the #2 position and then there is a small button you have to push in on the ignition/lock assembly under the dash in order to completely free up the steering wheel lock. Then you unplug the electric connector and do some awkward twisting and turning and swearing until it finally comes out.

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'81 300TD Wagon 355k (Miss Diesel)
'83 300SD 180k
'84 500SEL 190k (Parting it out)