The present invention relates to a process for preparing hydrochloride salt of N-fatty acyl substituted amino acid ethyl ester. Said process includes the steps of: dissolving L-arginine ethyl ester dihydrochloride in distilled water with continuous agitation for a period of about 10 to about 20 minutes to obtain a clear solution; lowering the temperature of the clear solution to about 5° C. to about 10° C. to obtain a cooled solution; adjusting the pH of the cooled solution in the range of about 7 to about 8 by adding sodium hydroxide solution; adding at least one organic solvent to the clear solution with continuous agitation to obtain an intermediate mixture; condensing the intermediate mixture by simultaneously adding an acid halide and 20% sodium hydroxide solution at a temperature of about 7° C. to about 9° C. and at a pH in the range of about 7.2 to about 7.5 for about 2 hours to obtain a mixture; raising the temperature of the mixture to about 18 to about 20° C. followed by addition of sodium hydroxide to adjust the pH of the mixture to about 7.3; warming the mixture at a temperature of about 25 to about 30° C. to obtain a resultant mixture containing organic phase and aqueous phase; separating the organic phase and aqueous phase of the resultant mixture by settling the mixture; and distilling the organic phase under vacuum at a temperature of about 70° C. to about 75° C. to obtain a hydrochloride salt of ethyl lauroyl arginate.