Liquefaction causes catastrophic damage in the form of foundation failures and structural instabilities. In this study, an earthen embankment constructed on loose saturated cohesionless soil is modelled using finite element analysis considering plane strain condition in PLAXIS 2D. An advanced constitutive model, UBC3D-PLM, which describes the mechanical behaviour of soils under cyclic loading is implemented. The model is calibrated using data from the cyclic direct simple shear test results of the foundation soil and validated using the results of centrifuge tests available in the literature. Three practical dynamic boundary conditions, such as tied degrees of freedom, free field elements and viscous boundary conditions are adopted in the finite element simulations. Emphasis is laid on the possibilities and limitations of each type of boundary condition. Stage wise modelling procedure is adopted to appropriately produce the initial conditions for the foundation soil, embankment, and hydrostatic pore pressure before applying the seismic excitation. A set of eleven seismic ground motions based on moderate to large intensity earthquakes is given as input to the finite element model and the dynamic response of the embankment is studied along with the liquefaction of the foundation soil. It is concluded that the finite element method is capable of simulating the realistic response of the embankment resting on liquefiable soil deposits.