Despite a lack of modern large earthquakes on shallowly dipping normal faults, Holocene Mw > 7 low-angle normal fault (LANF; dip<30°) ruptures are preserved paleoseismically and inferred from historical earthquake and tsunami accounts. 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. We develop data-constrained 3D dynamic rupture models of the active Mai’iu LANF that highlight how multiple dynamic shallow deformation mechanisms compete during large LANF earthquakes. We show that shallowly-dipping synthetic splays host more coseismic slip and limit shallow LANF rupture more than steeper antithetic splays. Inelastic hanging-wall yielding localizes into subplanar shear bands indicative of newly initiated splay faults, most prominently above LANFs with thick sedimentary basins. Dynamic splay faulting and sediment failure limit shallow LANF rupture, modulating coseismic subsidence patterns, near-shore slip velocities, and the seismic and tsunami hazards posed by LANF earthquakes.