The inviscid temporal stability analysis of two-fluid parallel shear flow with a free surface, down an incline, is studied. The velocity profiles are chosen as piecewise-linear with two limbs. The analysis reveals the existence of unstable inviscid modes, arising due to wave interaction between the free surface and the shear-jump interface. Surface tension decreases the maximum growth rate of the dominant disturbance. Interestingly, in some limits, surface tension destabilises extremely short waves in this flow. This can happen because of the interaction with the shear-jump interface. This flow may be compared with a corresponding viscous two-fluid flow. Though viscosity modifies the stability properties of the flow system both qualitatively and quantitatively, there is qualitative agreement between the viscous and inviscid stability analysis when the less viscous fluid is closer to the free surface. © 2016, Springer Science+Business Media Dordrecht.