Coal seam degasification by underground drilling and its effect are directly related to mining safety and coalbed methane (CBM) recovery efficiency. The coal seam permeability is a critical parameter affecting the gas drainage effect and the evolution of gas flow field around the borehole. However, the distribution and evolution of coal permeability during gas drainage remains unclear and has resulted in failure of gas drainage radius determination and borehole arrangement in field applications. In this work, we propose an improved coal permeability model, which incorporates the coal deformation, gas diffusion in matrix, and gas flow in fracture. For the dual-porosity attribute of CBM reservoir, two gas pressures, namely, fracture and matrix gas pressures, and the swelling stress caused by gas adsorption have been introduced to improve the effective stress principle. Furthermore, because the classical unipore diffusion model fails to calculate the diffusion coefficient of coal masses, we propose a multistage pore model, which considers a widely distributed pore structure. Based on the multistage pore model, a dynamic diffusion coefficient is introduced in the permeability model. The improved permeability model is then compared with an analytical solution and field data. With the verified model, we analyzed the sensitivity of coal permeability to the key parameters in the model. The results show that the permeability increases with the increase of Langmuir adsorption constants a and b, initial permeability k0, and diffusion coefficient D0, and the decrease of the attenuation coefficient λ. From the analyses, we find that when a relatively large value is used for a, b, k0, and D0, and a relatively small value is given to λ, a phenomenon of permeability rebound, which is thought to be related to the matrix shrinkage, is observed during gas drainage. This phenomenon contributes to the improvement of gas drainage effect. Therefore, certain measures, such as protective seam mining and hydraulic flushing, can be adopted to accelerate the appearance of the permeability rebound. In addition, the determination of the effective drainage radius (EDR) is discussed from the perspective of dual-porosity medium. Both the fracture and matrix gas pressures are used to determine the EDR, and the results show that the EDR determined by matrix gas pressure matches well with the field test result. Therefore, it is concluded that the matrix gas pressure is the reasonable index for the determination of the EDR.