Physically compliant actuator brings significant benefits to robots in terms of environmental adaptability, human–robot interaction, and energy efficiency as the introduction of the inherent compliance. However, this inherent compliance also limits the force and position control performance of the actuator system due to the induced oscillations and decreased mechanical bandwidth. To solve this problem, we first investigate the dynamic effects of implementing variable physical damping into a compliant actuator. Following this, we propose a structural scheme that integrates a variable damping element in parallel to a conventional series elastic actuator. A damping regulation algorithm is then developed for the parallel spring-damping actuator (PSDA) to tune the dynamic performance of the system while remaining sufficient compliance. Experimental results show that the PSDA offers better stability and dynamic capability in the force and position control by generating appropriate damping levels.