The linear and nonlinear spatio-temporal stability of an interface separating two Newtonian fluids in pressure-driven channel flow at moderate Reynolds numbers is analysed both theoretically and numerically. A linear, Orr–Sommerfeld-type analysis shows that most of such systems are unstable. The transition to an absolutely unstable regime is investigated, and is shown to occur in an intermediate range of Reynolds numbers and ratios of the thicknesses of the two layers, for near-density matched fluids with a viscosity contrast. A critical Reynolds number is found for transition from convective to absolute instability of relatively thin films. Results obtained from direct numerical simulations (DNSs) of the Navier–Stokes equations for long channels using a diffuse-interface method elucidate that waves generated by random noise at the inlet show that, near the inlet, waves are formed and amplified strongly, leading to ligament formation. Successive waves coalesce with each other further downstream, resulting in longer larger-amplitude waves further downstream. In the linearly absolute regime, the characteristics of the spatially growing wave near the inlet agree with that of the saddle point as predicted by the linear theory. The transition point from a convective to an absolute regime predicted by linear theory is also in agreement with a sharp change in the value of a healing length obtained from the DNSs.