The hyperbolicity condition of the system of partial differential equations (PDEs) of the incompressible two-fluid model, applied to gas–liquid flows, is investigated. It is shown that the addition of a dispersion term, which depends on the drag coefficient and the gradient of the gas volume fraction, ensures the hyperbolicity of the PDEs, and prevents the nonphysical onset of instabilities in the predicted multiphase flows upon grid refinement. A constraint to be satisfied by the coefficient of the dispersion term to ensure hyperbolicity is obtained. The effect of the dispersion term on the numerical solution and on its grid convergence is then illustrated with numerical experiments in a one-dimensional shock tube, in a column with a falling fluid, and in a two-dimensional bubble column.