The coaxial laser has been introduced to shaped tube electrochemical machining (STEM), referred to as Laser-STEM, to enhance the materials removal rate and precision. To address the issue of central residual formation during the Laser-STEM process, which limited the machining stability and feeding rate, the retracted hybrid tubular electrode was applied. The formation mechanisms and effects of the W-shaped central residual were analyzed. Simulation and experiments were conducted to study the impact of the retracted length of the tubular electrode. Simulation results showed that a retracted length of 1-1.5 mm of the inner low-refractive layer could improve the electric current density distribution homogeneity to remove the W-shaped central residual in the machining area. The electric current density distribution homogeneity in the machining zone has been decreased by 38% by utilizing the hybrid tubular electrode with a retracted length of 2.0 mm. With a proper retracted length, the laser coupling efficiency exceeded 74.5%. Hence, the retracted hybrid tubular electrode could act as both the tool electrode and optical waveguide in the Laser-STEM process. Experimental results proved that the machining efficiency and precision of Laser-STEM could be enhanced by utilizing the retracted hybrid tubular electrode. With the retracted length deg rising from 0 mm to 1.5 mm, the maximum feeding speed increased by 373%, and the machining precision was improved by 42.2%. The maximum feeding rate of 4.1 mm/min has been achieved using the retracted hybrid tubular electrode in the Laser-STEM process, which has been improved by 105%, compared with the available maximum feeding rate of the tubular electrode in the STEM process. Finally, the small holes with a diameter of 1.4 mm and an aspect ratio of 15 have been processed by Laser-STEM with the retracted hybrid tubular electrode.