Cities around the globe face major last mile delivery (LMD) challenges as a result of surging online commerce activity, increased parcel delivery demands, lack of parking capacity, and severe traffic congestion particularly in inner city areas. Although a number of innovative solutions and pathways have been proposed to address these challenges, their full impacts are still not well understood due to the lack of comprehensive field studies and real-world data on their performance. Traffic simulation techniques, which are widely used to model and evaluate the impacts of a wide range of urban mobility interventions, offer opportunities to investigate the impacts of city logistics interventions. However, research evidence on this topic remains fragmented, hindering constructive analysis of the role of traffic simulation and modelling in shaping sustainable urban delivery interventions. Given the growing research interest in the nexus of traffic simulation and city logistics, this paper aims to identify and evaluate primary studies related to the simulation forms, evolution, effectiveness, and their feasibility in evaluating the impacts of urban delivery interventions. The paper achieves this through a holistic systematic review that consolidates diverse perspectives on the topic. The paper analysed 79 articles, published by December 2023, that have used traffic simulation to model and evaluate a wide range of city logistics interventions. The review identified five main themes in the literature surrounding development and applications of traffic simulation, namely their use in evaluating the role of information and communication technologies, evaluations of advances in types and forms of delivery vehicles, their application in supporting policy interventions, evaluations of innovations in city logistics facilities and impacts of the collaborative economy. The review also helped in gaining insights about urban delivery interventions and their impacts as stand-alone or in combination with other solutions. The analysis confirms the validity and versatility of traffic simulation as an approach to model the impacts of urban delivery interventions on traffic flow, delivery service and customers, but also the sustainability implications of interventions. The paper also provides a future research agenda to guide future studies in developing and evaluating applications of various interventions with the leverage of traffic simulation.