Although the deployment/retrieval of the tethered satellite system has been widely studied, the underactuated control problem has not been solved well, because the convergence of the system’s uncontrollable states cannot be strictly proved. In this paper, a novel underactuated controller of the tethered satellite system for both deployment and retrieval is proposed. This proposed control scheme makes the best of the dynamics characteristic of the tethered satellite system, which has not previously been used for controller design. Based on the dynamics analysis, an ingenious virtual signal is designed and a control scheme is proposed by using the system passivity. With the addressed virtual signal, the coupling behavior between the controllable tether length and uncontrollable in-plane angle is enhanced. Under the scheme, the uncontrollable in-plane angle can be controlled by using the coupled tether length. To prove the addressed control strategy, a detailed stability analysis of the closed-loop system is provided in the paper via Lyapunov function and LaSalle’s invariance principle. Therefore, it is strictly proven that all the system states can converge to the desired states. Finally, both of the deployment and retrieval cases are simulated. The simulation results prove that the subsatellite can be quickly and stably deployed and retrieved.