Low pressure, low permeability, and low saturation of Chinese coal-bed methane (CBM) reservoirs make underbalanced drilling (UBD) widely used for mining CBM in China. In this study, mechanical behavior and permeability of coal rock were investigated under different degrees of unloading confining pressure (UCP)-reloading axial stress (RAS) by a triaxial experimental apparatus. These tests revealed that: (1) peak deviatoric stress of coal rock in UCP-RAS is lower than that in a conventional triaxial compression (CTC) test, and the peak deviatoric stress linearly relates the degree of unloading confining pressure. The deformation modulus of coal in UCP-RAS is lower than that in CTC, while the lateral expansion ratio is larger than that in CTC; (2) higher UCP leads to a faster increase of permeability during RAS until the failure of coal; (3) the cohesion and internal friction angle tested by UCP-RAS are lower by 4.57% and 15.18% than those tested by CTC. In addition, a field case (Zhaozhuang well, Qinshui Basin, China) of a well collapse problem validates the higher probability of wellbore collapse due to the increase of equivalent collapse fluid density, which is calculated by using coal rock parameters tested by UCP-RAS rather than by CTC.