Retaining wall structures are widely used in different civil engineering projects including building construction, highways, railways, water conservancy, harbors, and many other projects in order to resist the lateral pressure of soil and water. According to their deformation behavior, retaining walls can be classified as flexible walls and rigid walls. Deformable inclusions such as expanded polystyrene, EPS, geofoam can be used to reduce the lateral earth pressure on retaining wall structures. In this study, the effect of using EPS geofoam inclusion on the reduction of lateral earth pressure and stability behavior of non-yielding and yielding retaining walls with cohesionless backfills is examined through a finite element analysis using ABAQUS software. A parametric analysis was performed to examine the effectiveness of EPS inclusion considering different parameters including the foam thickness, short and long-term characteristics of the foam density, surcharge load on backfill and the backfill properties. According to the results obtained, the earth pressure and subsequently the sliding forces and overturning moments were reduced on non-yielding and yielding retaining walls due to the EPS inclusion. The percentage of reduction was higher in the case of non-yielding walls with zero surcharge pressure. The reduction in sliding forces and overturning moments reached 47 %. Moreover, it was found that the lateral earth pressure, sliding forces and overturning moment on retaining walls were decreased with the increases of the foam thickness. However, the lateral earth pressure was slightly increased with the increase of the foam density. Empirical equations of reduction in lateral forces and overturning moments were developed as a function of foam thickness.