Session-based recommendation aims to predict the next item that anonymous users may be interested in, based on their current session interactions. Recent studies have demonstrated that retrieving neighbor sessions to augment the current session can effectively alleviate the data sparsity issue and improve recommendation performance. However, existing methods typically rely on explicitly observed session data, neglecting latent neighbors - not directly observed but potentially relevant within the interest space - thereby failing to fully exploit the potential of neighbor sessions in recommendation. To address the above limitation, we propose a novel model of diffusion-based latent neighbor generation for session-based recommendation, named DiffSBR. Specifically, DiffSBR leverages two diffusion modules, including retrieval-augmented diffusion and self-augmented diffusion, to generate high-quality latent neighbors. In the retrieval-augmented diffusion module, we leverage retrieved neighbors as guiding signals to constrain and reconstruct the distribution of latent neighbors. Meanwhile, we adopt a training strategy that enables the retriever to learn from the feedback provided by the generator. In the self-augmented diffusion module, we explicitly guide the generation of latent neighbors by injecting the current session's multi-modal signals through contrastive learning. After obtaining the generated latent neighbors, we utilize them to enhance session representations for improving session-based recommendation. Extensive experiments on four public datasets show that DiffSBR generates effective latent neighbors and improves recommendation performance against state-of-the-art baselines.