Once you jack it up the wheel should spin freely. If it doesnt then start from the brakes and work you way inward. It could be a stuck caliper or a warped rotor which is fairly common. Then if those are okay, possibly a bad wheel bearing. The grease can dry out in them over time. If that's still good it could be a bad Constant Velocity (CV) joint or half shaft. Worst case is the differential is messed up.
Start with the side the sound is most noticeable on. Also, while you have the car up off the ground check your Rear Shock Mounts (RSM) as they are a common failure point but usually make a "clunk" when they go. Also check the Rear Trailing Arm Bushings (RTAB) as those wear out as well. Check the subframe for damage too because it can and has failed on some Cars.
Hope this helps. For detailed picture referencing please click the link to the E36 Bentley Manual located in my signature.