A subsea drilling system comprises a pressurized drilling capsule that is sealed against the subsea environment and houses equipment for manipulating a drillstring that extends through an opening in the drilling capsule to the exterior of the capsule. A drilling fluid handling assembly is contained within the drilling capsule that communicates drilling fluid through the drillstring and returns the drilling fluid to the water's surface via a drilling fluid conduit. A seafloor unit engages the seafloor and the drilling capsule to position the drilling capsule relative to the seafloor, and includes an opening for passing the drillstring into the seafloor. A pressurized transport unit is movable between the drilling capsule and a support vessel at or near the water's surface for delivering personnel and supplies to the drilling capsule. A method of drilling using the subsea drilling system is disclosed.
