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Superionic conductors exhibit promising thermoelectric properties due to their ultralow thermal conductivity. The fundamental mechanisms have long been debated between the anharmonicity or the breakdown of transverse acoustic (TA) phonons, where the shearing vibrational degrees of freedom are lost, as in a liquid state. We report on neutron/x-ray scattering and first-principles studies on the lattice dynamics and ionic diffusion of AgCrSe₂. Our momentum-resolved measurements on single-crystals clearly establish the persistence of long-wavelength TA phonons in the superionic phase, whereas the shorter wavelength, non-dispersive portions of the TA branches severely broaden reflecting extreme anharmonicity. Further, we find a strong repulsion between Ag neighbors, affecting the diffusion mechanism. Our studies of atomic dynamics and diffusion will help rationalize the emergence of ultralow thermal conductivity for thermoelectrics and facilitate the design of high-performance solid-state electrolytes.