The installation of polystyrene geofoam (EPS) inclusions between the rigid retaining wall and backfill can reduce the earth pressure acting on the retaining wall. To date, there is a lack of the calculation method for the earth pressure on rigid retaining walls with EPS inclusions. In this study, the compression from geofoam inclusions is equated to the displacement of the backfill, and the soil arching behind the retaining wall is considered. Based on the displacement-dependent earth-pressure model (DDEP), the iterative method is introduced for the convergence calculation, and then the theoretical solution is obtained to calculate the earth pressure on the rigid retaining wall with EPS inclusion. The advantage of the proposed method is that it can be used to solve the earth pressure when the EPS compression modulus is not provided. A series of FLAC3D numerical models is established to verify the proposed method and analyze the load reduction effect of EPS inclusions. The proposed theoretical solutions based on the DDEP model and iterative method are in preferably consistency with the numerical results. Effect of EPS on reducing the earth pressure increases with increase of the thickness of EPS inclusions when EPS elastic modulus is constant, and decreases with increase of the elastic modulus of EPS inclusions while EPS thickness is constant.