The Ninja Dagger is one of two weapons that can be dropped by the Pirate Boss, the other being the Trickster Dagger. The Ninja Dagger has two special abilities. First, if the player right clicks with it, they gain the Invisibility Potion Effect for 5 seconds, at the cost of 1 durability. Second, if the player shift+right-clicks with it, they can teleport a short distance forward of 4 blocks, at the cost of 2 durability.
Before the update one could shift-right-click with it to spawn clones of yourself, with the same armor and weapon in your hand but with a steve skin; this skill was transferred to the Trickster Dagger.