We consider the two-layer flow of immiscible, viscous, incompressible fluids in an inclined channel. We use long-wave theory to obtain a strongly nonlinear evolution equation which describes the motion of the interface. This equation includes the physical effects of viscosity stratification, density stratification, and shear. A weakly nonlinear analysis of this equation yields a Kuramoto–Sivashinsky equation, which possesses a quadratic nonlinearity. However, certain physical situations exist in two-layer flow for which modifications of the Kuramoto–Sivashinsky equation are physically pertinent. In particular, the presence of the second layer can mediate the wave-steepening instability found in single-phase falling films, requiring the inclusion of a cubic nonlinearity in the weakly nonlinear analysis. The introduction of the cubic nonlinearity destroys the symmetry-breaking bifurcations of the Kuramoto–Sivashinsky equation, and new isolated solution branches emerge as the strength of the cubic nonlinearity increases. Bistability between these new solutions and those associated with the Kuramoto–Sivashinsky equation is found, as well as the formation of a hysteresis loop from smaller-amplitude travelling waves to larger-amplitude travelling waves. The physical implications of these dynamics to the phenomenon of laminar flooding in a channel are discussed.