High-resolution observations show that large earthquakes commonly involve slip on multiple faults along with localized and distributed inelastic off-fault damage. Despite a lack of modern large earthquakes on shallowly dipping detachments, Holocene Mw>7 detachment ruptures are preserved in the paleoseismic record and inferred from historical accounts of such earthquakes and resulting tsunamis. Even in well-recorded megathrust earthquakes, the effects of non-linear off-fault plasticity and dynamically reactivated splay faults on shallow deformation and surface displacements, and thus hazard, remain elusive. Here, we develop geologically, geodetically and geophysically constrained 3D dynamic rupture models of the active Mai’iu fault in Papua New Guinea that highlight how multiple dynamic shallow deformation mechanisms compete in large detachment earthquakes. We show that splay faults in the detachment’s hanging wall are likely to rupture coseismically, with more slip expected on splays that dip at shallow angles synthetic to the detachment. Inelastic off-fault yielding in the hanging wall localizes into subplanar shear bands indicative of newly initiated splay faulting, most prominently above detachments with thick sedimentary basins in their hanging walls. Dynamic splay faulting and sediment failure limit shallow detachment rupture, modulating coseismic subsidence patterns, near-shore slip velocities, and the seismic and tsunami hazards posed by detachment earthquakes.