A novel process for the preparation of a compound of the formula (II), which is useful as intermediate compound for the preparation of thiazolidinedione derivatives, such as rosiglitazone, pioglitazone, troglitazone and ciglitazone, is disclosed. The novel process comprising reacting a compound of the formula (III) with a compound of the formula (IV) in a mixture of a non-polar water immiscible organic solvent and water (two phase system) with an alkali metal hydroxide or an alkali metal carbonate as a base in the presence of a phase transfer catalyst. In the first aspect of the present invention comprising reacting 2-(N-methyl-N-(2- pyridyl) ethanol with 4-fluorobenzaldehyde in the mixture of a non-polar water immiscible organic solvent, preferably toluene, and water with an alkali metal hydroxide or an alkali metal carbonate as a base, preferably potassium hydroxide, in the presence of a phase transfer catalyst, e.g. tetra n-butylammonium hydrogensulphate or benzyltriethylammonium chloride, to obtain 4-[2-(N-methyl-N-(2- pyridyl)amino)ethoxy]benzaldehyde, which is the key intermediate for preparing rosiglitazone and its salts, e.g. maleate salt or phosphate salt, useful in the treatment of Type II diabetes.