Casing-while-drilling (CWD) with down the hole (DTH) hammer drilling technology has been widely used in unconsolidated formations, due to its advantages in protecting the borehole wall, excellent rock cuttings capacity, and fast penetration rate in hard rock. As an important component of the CWD system, the structure of the retractable drill bit needs not only to ensure to form stronger reverse circulation, but also to be expandable or retractable as needed, otherwise the drill bit cannot be lift and put down smoothly in the casing, and may lead to drilling accidents. This paper developed a new type of reverse circulation DTH hammer drill bit used for CWD drilling technology. The retractable performance of this type of drill bit is studied using ADAMS software. The results show that it is smoothly expandable and retractable as designed under the conditions of the weight of the bit (WOB) of 0.5–2.0 t and the rotation speed of 30–60 r/min. To investigate the reverse circulation effect of the drill bit, Fluent software was used to simulate the flow characteristic inside it. The simulation results indicated that it can form strong reverse circulation, and the entrainment ratio h can reach 9.5%.