In this paper, shear, effective stress and pore pressure distributions of two-layer porous soils subjected to harmonic waves are presented. The instability of the porous soil because of wave loading is investigated in terms of instantaneous liquefaction. The governing equations are written in their fully dynamic form, and possible simplifications are introduced. Finite-element models are developed for each formulation, and numerical results are verified with their corresponding analytical solutions, which are also developed here. Then, the problem of a two-layer soil under waves both in an open domain and in front of a vertical wall is studied in terms of dynamic response variations and regions of instantaneous liquefaction. Both linear and nonlinear waves are considered. Finally, a number of parametric studies to investigate the effect of a surface clay layer, inertial terms in the equations, various soil and wave parameters, and wave nonlinearity on the dynamic behavior and instability are carried out. The results indicate that the two-layer response is significantly different from that of a conventional single-layer approach. Inertial terms are partially important in terms of stress variations depending on the wave and seabed parameters. The clay layer reduces the amount of liquefaction protecting the underlying seabed, until it reaches a certain thickness beyond which the depth of liquefaction increases. Wave period, inertial terms, and wave nonlinearity affect the response for an open domain and in the presence of a wall, mostly leading to more liquefaction. DOI: 10.1061/(ASCE)WW.1943-5460.0000155. (C) 2012 American Society of Civil Engineers.