X-type rotary engines (XREs), using the high efficiency hybrid cycle, possess advantages of simple structure, high power-to-weight ratio, and high theoretical efficiency, making XREs as potential power sources in hybrid vehicles and small unmanned aerial vehicles. Typically, ignition timing has a promising potential to improve the combustion performance of spark ignition engines. In this work, the effects of ignition timing on flame propagation, combustion characteristics, and pollutants formation were studied adopting a three-dimensional simulation method. The results showed that at different engine speeds, significantly different flow forms and flow velocities in the larger chamber recess of the XRE were formed, resulting in large differences in flame propagation velocities at leading side and trailing side of the combustion chamber. Advancing ignition timing increased the flame propagation velocity at the given engine speed. Ignition timing had a more significant effect on peak pressure at medium-high speeds compared to low engine speeds. At 3000 RPM and 5000 RPM, the peak pressure was increased significantly with advancing ignition timing, but when ignition timing was advanced to -30 °CA, the increment in the in-housing pressure was minimal. As ignition timing was retarded, the ignition delay was slowly reduced. The effect of ignition timing on ignition delay was more significant for low speeds than for medium-high speeds. However, the influence of ignition timing on combustion duration showed the opposite trend. Delayed ignition showed a slight increase in indicated thermal efficiency and indicated mean effective pressure at low speeds, while the opposite was true at medium-high speeds. Nevertheless, the effect of ignition timing and engine speed on indicated specific fuel consumption is opposite to the trend of the above laws. With the increase of ignition timing, the NOx mass fraction first increased and then decreased at low speeds, with the maximum occurred at -30 °CA, but the NOx mass fraction continued to increase at high speeds. Soot and CO productions were slightly affected by ignition timing. To sum up, this XRE, setting the ignition timing of -30 °CA, achieved better flame propagation and engine performance at the price of a smaller increment of NOx emissions.