In this study, a novel hybrid additive and subtractive manufacturing method using pulsed arc plasma (PAP-HASM) was developed to better integrate additive and subtractive processes. The PAP-HASM process is based on the flexible application of pulsed arc plasma. In this PAP-HASM method, wire arc additive manufacturing using pulsed arc plasma (PAP-WAAM) and dry electrical discharge machining (EDM) milling were used as additive and subtractive techniques, respectively; both are thermal machining processes based on pulsed arc plasma, and both are dry machining techniques requiring no working fluids. The PAP-HASM can be easily realized by only changing the pulsed power supply and tool electrodes. A key technological challenge is that the recast layer on the part surface after dry EDM milling may have a detrimental effect on the component fabricated by PAP-HASM. Here, the hybrid manufacturing method developed in this study was validated with commonly used 316L stainless steel. Preliminary experimental results showed that the PAP-HASM specimens exhibited excellent tensile properties, with an ultimate tensile strength of 539 ± 8 MPa and elongation of 46 ± 4%, which were comparable to the PAP-WAAM specimens. The recast layer on the surface after dry EDM milling has no significant detrimental effect on the mechanical properties of the parts fabricated by PAP-HASM. In addition, compared with components fabricated by PAP-WAAM, those fabricated by PAP-HASM showed significantly better surface roughness.