n-caproate, which is produced via chain elongation (CE) using waste biomass, can supply various fossil-derived products, thus advancing the realization of carbon neutrality. Ammonia released from the degradation of nitrogen-rich waste biomass can act as a nutrient or an inhibitor in anaerobic bioprocesses, including CE, with the distinction being primarily dependent on its concentration. Currently, the optimal concentration of ammonia and the threshold of toxicity for open-culture n-caproate production using ethanol as an electron donor, along with the underlying mechanisms, remain unclear. This study revealed that the optimal concentration of ammonia for n-caproate production was 2 g∙L⁻¹, whereas concentrations exceeding this threshold markedly suppressed the CE performance. Exploration of the mechanism revealed the involvement of two forms of ammonia (i.e., ammonium ions and free ammonia) in this inhibitory behavior. High ammonia levels (5 g∙L⁻¹) induced excessive ethanol oxidation and suppressed the reverse β-oxidation (RBO) process, directly leading to the enhanced activities of enzymes (phosphotransacetylase and acetate kinase) responsible for acetate formation and diminished activities of butyryl-coenzyme A (CoA): acetyl-CoA transferase, caproyl-CoA: butyryl-CoA transferase, and caproyl-CoA: acetyl-CoA transferase that are involved in the syntheses of n-butyrate and n-caproate. Furthermore, the composition of the microbial community shifted from Paraclostridium dominance (at 0.1 g∙L⁻¹ ammonia) to a co-dominance of Fermentimonas, Clostridium sensu stricto 12, and Clostridium sensu stricto 15 at 2 g∙L⁻¹ ammonia. However, these CE-functional bacteria were mostly absent in the presence of excessive ammonia (5 g∙L⁻¹ ammonia). Metagenomic analysis revealed the upregulation of functions such as RBO, fatty acid synthesis, K⁺ efflux, adenosine triphosphatase (ATPase) metabolism, and metal cation export in the presence of 2 g∙L⁻¹ ammonia, collectively contributing to enhanced n-caproate production. Conversely, the aforementioned functions (excluding metal cation export) and K⁺ influx were suppressed by excessive ammonia, undermining both ammonia detoxification and n-caproate biosynthesis. The comprehensive elucidation of ammonia-driven mechanisms influencing n-caproate production, as provided in this study, is expected to inspire researchers to devise effective strategies to alleviate ammonia-induced inhibition.