We analyze an open many-body system that is strongly coupled at its boundaries to interacting quantum baths. We show that the two-body interactions inside the baths induce emergent phenomena in the spin transport. The system and baths are modeled as independent spin chains resulting in a global nonhomogeneous XXZ model. The evolution of the system-bath state is simulated using matrix-product-states methods. We present two phase transitions induced by bath interactions. For weak bath interactions we observe ballistic and insulating phases. However, for strong bath interactions a diffusive phase emerges with a distinct power-law decay of the time-dependent spin current Q alpha t(-alpha). Furthermore, we investigate long-lasting current oscillations arising from the non-Markovian dynamics in the homogeneous case and find a sharp change in their frequency scaling coinciding with the triple point of the phase diagram.