Two-layer flow of magnetic fluid and non-magnetic silicone oil was simulated numerically. The continuity equation, momentum equations,kinematic equation, and magnetic potential equation were solved in two-dimensional Cartesian coordinate. PLIC (piecewise linear integration calculation) VOF (volume of fluid) scheme was employed to track the free interface. Surface tension was treated via a continuous surface force(CSF) model that ensures robustness and accuracy. The influences of applied magnetic field, inlet velocity profile, initial surface disturbance of interface and surface tension were analyzed. The computed interface shapes at different conditions were compared with experimental observation.