A laboratory model test system was developed to study grouted nail-soil interactions under unsaturated conditions. A large soil specimen (730 mm high, 600 mm wide, and 1,000 mm long) was used in the installation of soil nails and sensors with minimal boundary effects. Sensors for measuring earth pressure, soil suction, and volumetric water content (dry density) were buried inside the soil specimen at different locations. Other sensors for measuring grouting pressure, pull-out displacement, and pull-out force were installed in the loading system. A loading and linear guide system was designed to apply a uniform overburden pressure using an air-filled rubber bag, which also simultaneously measured the soil surface displacement. Stockton Beach sand was studied and compacted in the box in layers. After application of the overburden pressure, a grouted nail was installed by injecting grout into a specially designed latex balloon. Pull-out testing was conducted seven days after grouting, which allowed the grout to cure to a suitable strength. The results obtained are presented in terms of the evolution of displacement, earth pressure, suction, dry density, and pull-out force. The recorded data were analysed to explore the earth pressure and density gradient of the surrounding soil. The quality of the results obtained demonstrates the performance of the developed testing system. The results can be further analyzed for theoretical and numerical developments involving compaction-grouted soil nails.