In this study, a constitutive model is developed in order to investigate wave–seabed interactions. This model takes into account the impact of principal stress rotation (PSR) and is based on the generalized plasticity theory, in which plastic strain generated by PSR is considered an additional item in the constitutive relationship of soil. The normalized loading direction and plastic flow direction were determined based on the stress tensor invariant. Comparisons between the present model and previous Hollow Cylinder Apparatus tests and geotechnical centrifugal wave tests show good agreement. Numerical results show the effects of PSR on predictions of liquefaction potential due to: (a) the cumulative impact of plastic strain in the seafloor and (b) the buildup of pore pressure. Parametric study shows that the model parameters, including the wave and seabed parameters, have significant effects on the wave-induced soil liquefaction.