A sterile dual-purpose closed intermittent urinary catheter system that may be used as either a drain line or a collection bag. A catheter resides within an inner cavity of an extensible sheath and may be extracted from a forward end through an outlet hub for insertion into the urethra. A valve at a rearward end of the sheath may be opened to permit the sheath to function as a drain line, or closed to permit the sheath to function as a collection bag. The sheath has an extended length substantially longer than the catheter length, and may be compressed in an accordion fashion or folded to a compact packaged shape. The urine may be collected in the sheath with the valve closed, or drained straight into a toilet with the valve open. The system may have a source of lubrication to wet the catheter.