In this paper, a nonlinear analysis method based on the proper orthogonal decomposition (POD) method and Galerkin projection is presented for the analysis and characterization of nonlinear inter-area oscillations. Using Galerkin projections onto bases of eigenfunctions obtained from the POD method, a new model is constructed that determines approximate solutions to the nonlinear power system behavior. The practical use of these methodologies is tested on a two area, 4-generators test system model. The validation is based on comparison with results from transient stability analysis using a commercially available transient stability program. A numerical error analysis is also included, and advantage and limitations are highlighted. Issues concerning the implementation of the method and numerical calculations are also discussed.