Hybrid aerial underwater vehicle is a novelty able to fly and swim, which is extensively suitable for missions like water sampling, observing semi-submerged structure, and underwater exploration, etc. Motivated by the efficiency of fixed-wing unmanned aerial vehicles (UAVs) and underwater gliders in their own specific environments and the maneuverability of rotary-wing UAVs, this paper presents an improved design of a multimodal HAUV capable of level and vertical flight, hovering, and underwater glide. Specially, to balance flight payload and weight under water, an innovative configuration is proposed, which includes a newly developed lightweight pneumatic buoyancy system and excludes the linear actuator commonly used for pitch control of gliders. Moreover, motor arms can fold for better hydrodynamics. All these tradeoffs demand an adequate match between the fuselage aerodynamics and propulsion property, and special management of buoyancy and weight to guarantee predicted performances. Therefore, key design principles are proposed and elaborated. Based on the principles, a prototype, named Nezha III, was fabricated and tested. The prototype’s performance characterization in the regions of underwater, flight, and water/air transition are presented. The results demonstrate the desired performance of the prototype under different modes, and notably prove its outstanding capability of diving to 50 m depth.