A compact-size Penning ion source with a small discharge volume (1.24 cm3) is developed. It consists of two concentric cylinders of different heights that act as cathodes and one hollow cylindrical anode. A homogeneous magnetic field is achieved within the discharge volume with geometrical optimization of the ion source. As a result, dense plasma is generated at low discharge power. The dynamics of the pulse mode discharge at low pulse width and frequency of anode voltage are studied. A high discharge (hundreds of amperes) current pulse with low delay time and fast rise time is recorded. The ion source is equally efficient to operate in continuous as well as pulse modes of ionization for various gases. It is operated in a wide range of low pressure at low anode voltage. An extraction system is designed to extract ions efficiently in the axial direction at a variable extraction voltage. The beam current of 200 µA in continuous mode and 6 A fast pulse in the pulsed mode of discharge have been measured. Variable beam current can be extracted with variable extraction voltage for any potential application.