Based on the ultraheavy oil area in AL-1 Block, Shengli Oilfield, China, a two-dimensional (2D) high-temperature–high-pressure (HTHP) visualized scaled physical simulation system was constructed to investigate intensively oil displacement mechanisms underlying steam flooding for horizontal well at different development stages. The results indicated that whole process is divided into three phases: water extraction phase, steam effective displacement phase, and steam breakthrough phase. Different phases have different oil displacement mechanisms. These differences are caused mainly by the synthetic actions of horizontal displacement and vertical drainage. A series of physical experiments were conducted to evaluate the optimal parameters affecting the development effects of steam flooding for horizontal wells. The results indicated that the development effect at the pressure of 5 MPa is better than that at 7 MPa when the steam dryness at the bottom of the well was 0.6; the steam dryness at the bottom should be kept above 0.4; the steam chamber was fully expanded at the injected intensity of steam of 1.9 ton/(d. ha. m). Increasing steam dryness under high-pressure conditions can facilitate an effective development. The results were successfully used to guide 18 horizontal wells from AL-1 Block, and the data collected here may provide important guidance for steam flooding in heavy or ultraheavy oil reservoir.