Intrinsically low lattice thermal conductivity (κlat) in superionic conductors is of great interest for energy conversion applications in thermoelectrics. Yet, the complex atomic dynamics leading to superionicity and ultralow thermal conductivity remain poorly understood. Here, we report a comprehensive study of the lattice dynamics and superionic diffusion in AgCrSe2 from energy- and momentum-resolved neutron and X-ray scattering techniques, combined with first-principles calculations. Our results settle unresolved questions about the lattice dynamics and thermal conduction mechanism in AgCrSe2. We find that the heat-carrying long-wavelength transverse acoustic (TA) phonons coexist with the ultrafast diffusion of Ag ions in the superionic phase, while the short-wavelength nondispersive TA phonons break down. Strong scattering of phonon quasiparticles by anharmonicity and Ag disorder are the origin of intrinsically low κlat. The breakdown of short-wavelength TA phonons is directly related to the Ag diffusion, with the vibrational spectral weight associated to Ag oscillations evolving into stochastic decaying fluctuations. Furthermore, the origin of fast ionic diffusion is shown to arise from extended flat basins in the energy landscape and collective hopping behavior facilitated by strong repulsion between Ag ions. These results provide fundamental insights into the complex atomic dynamics of superionic conductors.