The present invention is directed to an improved process for preparing modafinil wherein benzhydrylthioacetate is prepared in high yield and purity by the reaction of a haloacetate with the reaction product of thiourea and benzhydrol. The reaction employing the haloacetate is conducted in a solvent comprising an organic solvent such as methanol having dissolved therein an organic base or an inorganic basic salt such as sodium bicarbonate. The resulting benzhydrylthioacetate can be amidated and then oxidized to provide the pharmaceutical grade modafinil in high yield and purity.