We investigate the effects of interactions between ions and neutrals on the chromosphere and overlying corona using 2.5D radiative MHD simulations with the Bifrost code. We have extended the code capabilities implementing ion–neutral interaction effects using the generalized Ohm’s law, i.e., we include the Hall term and the ambipolar diffusion (Pedersen dissipation) in the induction equation. Our models span from the upper convection zone to the corona, with the photosphere, chromosphere, and transition region partially ionized. Our simulations reveal that the interactions between ionized particles and neutral particles have important consequences for the magnetothermodynamics of these modeled layers: (1) ambipolar diffusion increases the temperature in the chromosphere; (2) sporadically the horizontal magnetic field in the photosphere is diffused into the chromosphere, due to the large ambipolar diffusion; (3) ambipolar diffusion concentrates electrical currents, leading to more violent jets and reconnection processes, resulting in (3a) the formation of longer and faster spicules, (3b) heating of plasma during the spicule evolution, and (3c) decoupling of the plasma and magnetic field in spicules. Our results indicate that ambipolar diffusion is a critical ingredient for understanding the magnetothermodynamic properties in the chromosphere and transition region. The numerical simulations have been made publicly available, similar to previous Bifrost simulations. This will allow the community to study realistic numerical simulations with a wider range of magnetic field configurations and physics modules than previously possible.