The present invention is directed to an improved process for preparing modafinil wherein benzhydrylthioacetamide is prepared in high yield and purity by the reaction of a haloacetamide with the reaction product of thiourea and benzhydrol in aqueous solution. The reaction employing the haloacetamide is conducted in a solvent comprising water and an organic solvent such as dimethylformamide having dissolved therein a basic salt such as potassium carbonate. The resulting benzhydrylthioacetamide can be oxidized to provide the pharmaceutical modafinil.