Wave-mud interaction is investigated via laboratory experiments and numerical modeling. Concurrent measurements of free-surface elevation, velocity profiles and rheology is applied to study the surface wave damping and boundary layer structure. The measured timedependent velocity profiles in the mud layer reveal that the shear rate under wave loading is highly phase-dependent. The measured shear rate and rheological data allow us to back-calculate the time-dependent viscosity of the mud layer under various wave loadings. Mud viscosity fluctuates up to one order of magnitude within the wave cycle. The commonly adopted constant viscosity assumption is then evaluated via linear and nonlinear wave-mud interaction models. When driving the models with measured wave-averaged mud viscosity (forward modeling), the wave damping rate is generally over-predicted under the low wave energy condition. On the other hand, when a constant viscosity is chosen to match the observed wave damping rate (inverse modeling), the predicted velocity profiles in the mud layer are not satisfactory, and the corresponding viscosity is lower than the measured value. These discrepancies are less pronounced when waves become more energetic. Differences between the linear and nonlinear model results become significant under low energy conditions, suggesting an amplification of wave nonlinearity due to non-Newtonian rheology. In general, the constant viscosity assumption for modeling wave-mud interaction is only appropriate for more energetic wave condition.