The present invention relates to a facile, highly efficient and economical process for the preparation of optically active N-benzyl-3-hydroxypyrrolidine in high yield from a naturally occurring alkaloid vasicine. The natural alkaloid vasicine is used as a precursor of (S)—N-benzyl-3-hydroxypyrrolidine and (R)—N-benzyl-3-hydroxypyrrolidines which can easily be sourced from the medicinal plant Adatoda vasica by the method known in the art and transformed to optical isomers (R) and (S)—N-benzyl-3-hydroxypyrrolidine by the method described in the present invention.