A two-stage water-lift and water separation muffler for use with marine electrical generators installed onboard marine vessels. A first stage water-lift muffler has internal tunable sound suppression structure to provide a first stage of exhaust silencing, and a second stage water separator having internal tunable sound suppression structure to provide a second stage of exhaust silencing while separating entrained cooling water from exhaust gases. The combined first stage water-lift muffler and second stage water separator include internal baffling and silencing structure which is easily adaptable to different generator configurations thereby allowing for structural adjustments to the muffler to optimize sound suppression and minimize backpressure for particular generator and/or exhaust conditions.