The nonlinear dynamics of two-phase flow in heated channels has been studied numerically. Parallel channel density-wave stability analysis has been extended to the case of a simplified loop which includes the heated channel and pump characteristics. Stable limit cycles exist for parameter values in the linearly unstable region close to the density-wave marginal stability boundary (MSB). Sensitive dependence upon initial histories (t less than 0) and initial conditions (t equals 0) is found for parameter values for which there exist more than one attracting set - stable fixed points, stable limit cycle.