To address the coordinated control of rock-breaking energy efficiency and construction-induced vibration of a twin-wheel trench cutter in vibration-sensitive urban environments, a three-dimensional explicit dynamic model of twin-wheel rock cutting was established based on the JH-2 constitutive model, and multi-objective optimization of construction parameters was performed by combining response surface methodology (RSM) with the NSGA-II algorithm. The applicability of the adopted JH-2 parameter set for describing the dynamic response of sandstone was evaluated through comparison with split Hopkinson pressure bar (SHPB) test results. On this basis, the stress response, damage propagation, fragmentation evolution, and vibration characteristics of the rock under the successive action of multiple cutter teeth were investigated. The results show that rock failure within the twin-wheel interaction zone evolves successively from localized damage and damage-band propagation to coalescence of the damaged zones between the two cutter wheels and continuous fragmentation. Free surfaces generated by preceding fragmentation reduce the confinement of subsequent cutter–rock interaction zones and facilitate further rock breakage. The cutting load exhibits pronounced intermittent impact and non-stationary characteristics, while the induced rock vibration shows broadband and multi-frequency responses. The peak particle velocity (PPV) generally decreases with increasing propagation distance and is positively correlated with the milling force. Response surface models were established with specific energy (SE) and PPV as the optimization objectives. In terms of the linear effects, SE is influenced, in descending order, by milling thickness, cutting angle, and milling speed, whereas PPV is mainly governed by milling thickness and milling speed, with milling angle exhibiting a pronounced nonlinear effect. Increasing the milling thickness reduces SE but simultaneously increases PPV, demonstrating a distinct trade-off between rock-breaking energy efficiency and vibration control. The proposed SE–PPV multi-objective optimization framework provides a basis for selecting twin-wheel cutting parameters that balance efficient rock breaking and vibration control in vibration-sensitive urban environments.