Although the exhaust gas recirculation (EGR) technology has been proven effective to decrease the marine engine’s nitrogen oxides (NOx) emissions, it is associated with a considerable fuel consumption increase and challenges to the engine–turbocharger matching. This study aims to parametrically optimise the EGR and turbocharging system settings of a large marine two-stroke engine with the objective of obtaining the highest engine efficiency whilst ensuring compliance with the prevailing NOx emissions limits. Two typical configurations of the investigated engine (baseline and alternative) are modelled in the GT-SUITE software. Parametric simulations are performed with EGR rates up to 40% along with cylinder bypass rates up to 50%, and the simulation results are analysed to quantify the impact of the engine operation with EGR on the performance and NOx emissions parameters. For the baseline engine configuration, the EGR rate increase considerably deteriorates the brake specific fuel consumption (BSFC), which is attenuated by opening the cylinder bypass valve. The optimal combinations of the EGR and cylinder bypass rates for each operating point are identified for both configurations. Following the comparative assessment between the two engine configurations, recommendations for the engine operating modes are proposed, leading to BSFC improvement in the region of 0.7 to 2.9 g/kWh. This study provides insights for the operational settings optimisation of two-stroke engines equipped with EGR systems, contributing towards the reduction of the associated environmental carbon footprint.