A theoretical description and experimental demonstration of homodyne-detected two-color transient grating (2-C TG) signal are presented. By treating the coupled bath degrees of freedom as a collection of harmonic oscillators and using a short-time expansion method, approximated nonlinear response functions were obtained. An analytic expression for the two-color transient grating signal was obtained by carrying out relevant Gaussian integrals. The initial rising and decaying parts of the 2-C TG signal is shown to be critically dependent on the ultrafast inertial component of the solvation correlation function. The experimental results confirm the predictions of the theoretical model.