A highly viscoelastic fluid (Berger’s fluid) or a Newtonian fluid with equivalent viscosity is respectively paired with 24.8% saline, flowing parallel into a channel with a width-thickness ratio of 28:1, to study the formation mechanism and behavior of the interfacial waves. A high speed camera with image capture and software was used to determine the neutral stability line of interfacial wave generations. The experiment revealed the interfacial wave originates at the exit of co-extrusion die. The disturbance vortex theory and the disturbance energy theory are used to explain the mechanism of interfacial wave growth. Higher order cross spectral and pulse shift techniques is implemented to determine the wave speed and group velocity of interfacial waves. Energy transfer between leading harmonic and overtones is confirmed by bi-coherence spectral. Finally we demonstrate that the growth of interfacial wave near the die exit can not be described by the linear stability analysis.