Drilling with modulation-assisted machining (MAM) superimposes a low-frequency oscillation onto the drill feed motion. The otherwise continuous cutting in the drilling process is converted into a series of discrete cutting events. The result is a discrete chip formation process and concurrent improvement in chip ejection. The discrete chip formation and ejection in drilling with MAM were investigated via systematic experiments in OFHC Cu and Ti6Al4V using a two-flute twist drill and a single-flute gun drill. Drilling thrust force and chip morphologies for various modulation conditions are examined. The continuous cutting and discrete cutting regimes of modulation-assisted drilling are compared with conditions determined by a kinematic model. The results show that chip formation in the continuous cutting regime with MAM can influence chip breakage by random fracture at thin sections of the chip, but in this regime the resulting chip size is variable and not controlled. In contrast, when MAM conditions operate in the regime of discrete cutting, the deformed chip size can be directly controlled. The ability to control the chip size improves chip ejection and drilling process stability. A set of modulation conditions for enhanced performance of chip ejection are proposed. The study shows that modulation-assisted machining offers distinct advantages as a method for deep-hole drilling applications.