A free-space quantum key distribution system is demonstrated experimentally which makes use of polarized coherent short laser pulses and the differential phase shift scheme with a Faraday-Michelson interferometer. The system features low noise, high stability and low bit-error rate. In the proposed experimental scheme, polarizated short laser pulse of several nanoseconds duration is made to transmit through the free space to decrease noise and a low bit-error rate less than 6% is achieved.