Ammonia, with its 17.6% hydrogen by mass, is a hydrogen carrier and carbon-free fuel when produced using renewable energy sources. The production and combustion of green ammonia, devoid of carbon dioxide emissions, presents a promising avenue for significant reductions in greenhouse gas (GHG) emissions from a well-to-wake perspective. This paper presents a comprehensive methodology for developing and validating a thermodynamic model for a two-stroke low-speed marine engine incorporating a hybrid ammonia-diesel diffusion combustion system. The simulation tools, crucial to our study, undergo a rigorous validation process using experimental data obtained during diesel operation, ensuring the reliability of our results. The study then delves into various aspects of the ammonia-diesel combustion system, addressing combustion and emissions characteristics. The investigation includes diverse simulation scenarios involving direct fuel injection through dedicated valves into the cylinder head of a six-cylinder, turbocharged compression-ignition engine. The engine features two diesel injection valves and two ammonia injection valves to initiate the combustion process. Simulation scenarios include variations in the injection timing of the pilot diesel injector and the relative orientation of diesel and ammonia sprays. Case C emerges as the preferred configuration, demonstrating superior metrics regarding combustion stability, air-fuel mixing, and emissions profile compared to other cases. The results indicate a reduction of CO2 emissions of approximately 95% in mass compared to the baseline diesel operation. Furthermore, notable decreases in NOx emissions are observed, preliminarily attributed to the lower flame temperature of ammonia. Despite the appearance of N2O emissions as a result of ammonia oxidation, the overall potential reduction in GHG emissions, in CO2-equivalent terms, exceeds 85% at selected operating points. This work contributes valuable insights into optimising cleaner propulsion systems for maritime applications, facilitating the industry’s transition toward more sustainable and environmentally friendly practices.