The present invention provides an improved process for the preparation of 8-chloro-1-phenyl-1H-benzo[b][1,4]diazepine-2,4(3H,5H)-dione (hereafter referred to as the compound (IV)), which is useful as a key intermediate for the synthesis of Clobazam (referred to as the compound (I)) 7-chloro-1-methyl-5-phenyl-1H-benzo[b][1,4]diazepine-2,4(3H,5H)-dione. The process of the present invention further involves transformation of the compound (IV) into Clobazam (I), comprising (a) reacting the compound (II) (as described herein) with monoalkyl malonate in the presence of a coupling agent to obtain the compound (III) (as described herein); followed by the cyclization using a base; (b) reacting the compound-IV (as described herein) obtained from step (a) with methylating agent. The process of the present invention involves formation of novel intermediates methyl 3-((4-chloro-2-(phenylamino)phenyl)amino)-3-oxopropanoate (IIIa) and 3-((4-chloro-2-(phenylamino)phenyl)amino)-3-oxopropanoic acid (V).