Thermally induced density wave instability (DWI) (Type-II) is an important phenomenon for two-phase flow industrial systems. Developing numerical tools and methods for the prediction of the DWI boundary is of importance in the design and safety of nuclear reactors. With the advent of computational fluid dynamics (CFD) in nuclear safety analysis, it is important to first verify the CFD results against existing theory and validate them with experimental data. In this work, a CFD two-fluid model (TFM) for DWI was implemented and verified against the theory of Ishii (1971). Closure relations were selected to approach the homogeneous equilibrium flow model. A steady-state verification of the model was carried out first. Then, dynamic verification was performed. Predictions of the stability boundary and the frequency of oscillations are in a good agreement with the theory. This study further verifies the dynamic capability of TFM CFD.