In microbial communities, various cell types often coexist by occupying distinct spatial domains. What determines the shape of the interface between such domains-which in turn influences the interactions between cells and overall community function? Here, we address this question by developing a continuum model of a 2D spatially-structured microbial community with two distinct cell types. We find that, depending on the balance of the different cell proliferation rates and substrate friction coefficients, the interface between domains is either stable and smooth, or unstable and develops finger-like protrusions. We establish quantitative principles describing when these different interfacial behaviors arise, and find good agreement both with the results of previous experimental reports as well as new experiments performed here. Our work thus helps to provide a biophysical basis for understanding the interfacial morphodynamics of proliferating microbial communities, as well as a broader range of proliferating active systems.