The present study aims to investigate the interaction between a last-stage steam turbine blade row and diffuser. This work is carried out using computational fluid dynamics (CFD) simulations of a generic last-stage low-pressure (LP) turbine and axial–radial exhaust diffuser attached to it. In order to determine the validity of the computational method, the CFD predictions are first compared with data obtained from an experimental test facility. A computational study is then performed for different design configurations of the diffuser and rotor casing shapes. The study focuses on typical flow features such as effects of rotor tip leakage flows and subsequent changes in the rotor–diffuser interactions. The results suggest that the rotor casing shape influences the rotor work extraction capability and yields significant improvements in the diffuser static pressure recovery.