In the summer of 1942, the S7 sank the Swedish cargo ships Margareta and Luleå, delivering iron to Germany. Shortly after, the sub was cruising on the surface at night, off the Swedish coast not far from Norrtälje, when she was spotted by the Finnish sub Vesihiisi. The Vesihiisi fired one torpedo and the S7 sank quickly.

Four survivors who were standing in the conning tower were rescued by the Finnish sub. They were taken prisoners. Among them was the commander Sergey Lisin.

In July 1998, the S7 was located with side scan sonar on 40-45 m depth off Söderarm in the Stockholm archipelago.