A two-layer fluid with free surface is simulated in the time domain by a two-dimensional potential-based Numerical Wave Tank (NWT). The developed NWT is based on the boundary element method and a leap-frog time integration scheme. A whole domain scheme including interaction terms between two layers is applied to solve the boundary integral equation. The time histories of surface elevations on both fluid layers in the respective wave modes are verified with analytic results. The amplitude ratios of upper to lower elevation for various density ratios and water depths are also compared.