A theoretical model for the decay of progressive interfacial gravity waves propagating above a porous bed is developed assuming potential flow in a two-layer system with a free surface and a sharp interface. A new wave dispersion relation for two-layer flow above a quasi-static porous seabed is derived and investigated. The solutions for the nonlinear wave profile are derived using a perturbation method and the effects of geometric and flow parameters including bed characteristics, depth ratios and the densities of the two fluids are studied and discussed. Comparisons with existing analytical solutions for viscous interfacial wave attenuation over a rigid bed demonstrate the relative importance of the porous bed as a mechanism for wave decay. It is shown that the influence of a porous seabed on wave propagation is significant when the depth of the lower layer, normalised by the wavenumber, is less than π.