To improve the rate of penetration (ROP) in hard formations, a new high-speed drilling technique called Coiled Tubing Partial Underbalanced Drilling (CT-PUBD) is proposed. This method uses a rotary packer to realize an underbalanced condition near the bit by creating a micro-annulus and an overbalanced condition at the main part of the annulus. A new full-scale laboratory experimental system is designed and set up to study the hydraulic characteristics and drilling performance of this method. The system is composed of a drilling system, circulation system, and monitor system, including three key devices, namely, cuttings discharge device, rotary packer, and backflow device. The experimental results showed that the pressure loss increased linearly with the flow rate of the drilling fluid. The high drilling speed of CT-PUBD proved it a better drilling method than the conventional drilling. The experimental system may provide a fundamental basis for the research of CT-PUBD, and the results proved that this new method is feasible in enhancing ROP and guaranteeing the drilling safety.