A novel process prepares tolterodine, i.e. (R)-N,N-diisopropyl-3-(2-hydroxy-5-methylphenyl)-3-phenylpropanamine, in the racemic form, as well as intermediates useful for its preparation. Tolterodine free base may be prepared by reacting diisopropyl-(3-phenyl-3-p-tolyloxy-propyl)-amine and 60% aqueous sulfuric acid for three hours under stirring at room temperature. The reaction mixture is then poured over ice/water and then alkalized with 50% NaOH.