An improved process for preparation of Olanzapine pamoate monohydrate from Olanzpaine is disclosed which comprises mixing at room temperature a solution of olanzapine prepared in water in presence of an acid, with a solution of pamoic acid prepared in water in presence of a base; stirring and maintaining the reaction mixture for a sufficient time till precipitation of solid and drying the solid to obtain olazapine pamoate monohydrate.