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Air pollution from shipping is currently dominating the international and European agenda on environmental protection. Although port emissions are not significantly contributing to the overall picture of ship-generated emissions, it is important to note that the impact of ship exhaust pollutants has a direct effect on the human population and built environment of many urbanized ports. The passenger (main) port of Piraeus qualifies for a ship emission and externality study by virtue of its dominant presence in the Mediterranean expressed in terms of the most frequent port calls by coastal passenger ships and cruise ships operating in the region, as well as in terms of being a most crowded port city through hosting a sizeable resident and visiting (employers and otherwise) population over a relatively small area. An in-port ship activity-based methodology was applied for manoeuvring and berthing of coastal passenger ships and cruise ships calling at the passenger port of Piraeus, in order to estimate the emission of the main ship exhaust pollutants (NOX, SO2 and PM2.5) over a twelve-month period in 2008–2009. The estimated emissions were analyzed in terms of gas species, seasonality, activity and shipping sector. The application of external cost factors led to the estimation of the emission externalities, in an attempt to evaluate the economic impact of the damage emissions produce mainly upon the human population and the built environment. The results indicate that ship emissions in the passenger port of Piraeus reach 2600 tons annually and their estimated externalities over this period are around 51 million euro. Summer emissions and associated impacts are more profound and coastal passenger shipping, as opposed to cruise shipping, is the dominant contributor of emissions and associated externalities. Overall, in a port city such as Piraeus, the need to introduce stringent control on the emissions produced by passenger ships, beyond that dictated by the current 2005/33/EU Directive is very urgent.