A liquid nitrogen assisted polycrystalline diamond compact (PDC) bit drilling method is expected to be suitable for hot dry rock (HDR) drilling because the huge thermal stress induced in the drilling process can help to break the rock and the low temperature liquid nitrogen can efficiently cool the drilling tools. However, there is no experimental research on liquid nitrogen assisted PDC bits breaking high temperature granite, and the rock breaking efficiency of this new drilling method is still unclear. To investigate the feasibility and efficiency of liquid nitrogen assisted PDC bit breaking HDR, a novel experimental setup was designed. This setup is composed of four units: the drilling fluid circulation system, drilling system, formation simulation system, and data acquisition and control system. It can also be used to research the effects of drilling parameters such as weight on bit, rotary speed, drilling fluid jet pressure, and feed speed on drilling efficiency. A series of drilling experiments using liquid nitrogen and water have been successfully carried out with this setup. The results indicate that liquid nitrogen assisted PDC bit drilling has excellent performance in breaking HDR, which can accelerate the application of this new technique in geothermal drilling.