The formation and diffusion of plasma are complex and critical processes in plasma nitriding. A stable and high-concentration plasma atmosphere can effectively increase the diffusion rate and the thickness of the diffusion layer. In this study, a two-dimensional multi-physics model integrating physical kinetics, energy transfer, mass transfer, and electromagnetic induction was developed. The effect of a hollow-cathode structure on plasma distribution was investigated, and the edge effect observed on nitrided metals was eliminated. The impacts of the essential plasma diffusion parameters were simulated using the developed model. A simple but effective experiment was designed to validate the model. A diffusion furnace with DC and RF dual discharge was designed by adding a high-frequency coil to existing equipment. Subsequently, the effects of the two plasma excitation sources on the overall distribution of plasma were analyzed. Notably, the proposed model is a high-fidelity one based on actual device dimensions; therefore, it can be used to simulate, predict, and control the plasma formation process in the diffusion furnace. In addition, the model can provide reference data and guidance for optimizing the diffusion process and structural design of diffusion furnaces.