An in-deep comprehension of the static and dynamic operational characteristics of prestressed subgrade is essential for its analysis, design, and service performance evaluation. Based on the Buckingham π theory, a novel scaled static and dynamic model test system of the prestressed subgrade has been developed. The structural components, functional characteristics, and working mechanism of the test system were comprehensively elucidated, and a suite of static and dynamic model tests was conducted to study the deformation characteristics of the prestressed subgrade. It is demonstrated that the prestressed steel bars underwent prestress loss due to the additional stress induced creep of the soil elements below and adjacent to the load transfer plates (LTPs). Therefore, it is advisable to over-tension the prestressed steel bars in practical engineering. Upon the application of prestress, the subgrade surface experienced slight uplift deformation, which did not change the geometric shape and smoothness of the subgrade surface and demonstrated that the prestress reinforcement effect could diffuse to the subgrade surface. In the static double-load-plates tests, the prestressed subgrade presented obvious advantages in controlling the subgrade surface settlement and slope lateral deformation compared to the unreinforced subgrade, which could therefore improve the deformation resistance of the subgrade. In the short-term dynamic loading tests, both the acceleration and dynamic displacement of the subgrade approximately linearly decreased with an increase in the prestress, implying that the horizontal prestress had a notable beneficial impact on mitigating the subgrade vibration. Additionally, with the long-term dynamic loading, the prestress reinforcements could significantly restrain the cumulative plastic deformation of the subgrade, with the cumulative deformation decreasing as the applied prestress increased. The developed test system offers viable and implementable technical means for investigating the enhancement mechanism of a prestress reinforced subgrade, and the insights gained from the tests contribute to elucidating the effect of prestress reinforcements on the subgrade’s static and dynamic performance.