Interfacial behaviour of stratified and wavy-stratified flow is analysed in terms of measured velocity signals in liquid phase using Laser Doppler Velocimetry. Measurement of liquid height (interface level) is achieved using Laser Doppler Velocimetry synchronized with a computerised 3-dimensional traverse system. The precision obtained in measurement of air sheared interface level (liquid height) in this approach is 0.032±0.01 mm. First part of this paper deals with influence of gas and liquid superficial Reynolds numbers on the liquid height for stratified and wavy-stratified flow. With increase in liquid depth, waves are initiated at the gas-liquid interface which is precursor to slug formation. A critical liquid height for onset of slug formation is obtained in this part. The second part deals with the measurement of fluctuations occurring near to the air-sheared interface. These fluctuations are recorded in terms of local velocity of liquid phase and have been used to characterize the behaviour of air-water interface for stratified and wavy-stratified flow. Furthermore, influence of gas and liquid flow rates on local liquid velocity for different stratified and wavy-stratified flow conditions is analysed by plotting the axial velocity profiles in radial direction.