From the Microsoft Support homepage

To enable a Windows 95, Windows 98, or Windows 98 Second Edition client for NTLM 2 authentication, install the Directory Services Client. To activate NTLM 2 on the client, follow these steps:

Start Registry Editor (Regedit.exe).
Locate and click the following key in the registry:
HKEY_LOCAL_MACHINE\System\CurrentControlSet\Control
Create an LSA registry key in the registry key listed above.
On the Edit menu, click Add Value, and then add the following registry value:
Value Name: LMCompatibility
Data Type: REG_DWORD
Value: 3
Valid Range: 0,3
Description: This parameter specifies the mode of authentication and session security to be used for network logons. It does not affect interactive logons.
Level 0 – Send LM and NTLM response; never use NTLM 2 session security. Clients will use LM and NTLM authentication, and never use NTLM 2 session security; domain controllers accept LM, NTLM, and NTLM 2 authentication.
Level 3 – Send NTLM 2 response only. Clients will use NTLM 2 authentication and use NTLM 2 session security if the server supports it; domain controllers accept LM, NTLM, and NTLM 2 authentication.
Note To enable NTLM 2 for Windows 95 Clients, install Distributed File System (DFS) Client, WinSock 2.0 Update, and Microsoft DUN 1.3 for Windows 2000.

Quit Registry Editor.

Note For Windows NT 4.0 and Windows 2000 the registry key is LMCompatibilityLevel, and for Windows 95 and Windows 98-based computers, the registery key is LMCompatibility.