The present paper deals with the study of Rayleigh-Taylor instability at the cylindrical interface using viscous potential flow theory. In the inviscid potential flow theory, the viscous term in Navier-Stokes equation vanishes as viscosity is zero. In viscous potential flow, the viscous term in Navier-Stokes equation vanishes as vorticity is zero but viscosity is not zero. Viscosity enters through normal stress balance in viscous potential flow theory and tangential stresses are not considered. A dispersion relation is derived and stability is discussed in terms of various parameters such as Ohnesorge number, density ratio etc. A condition for neutral stability is obtained and it is given in terms of critical value of the wave number. It is observed that the Ohnesorge number has destabilizing effect while inner fluid fraction has stabilizing effect on the stability of the system.