When EMD was given the green light to build new passenger diesels in early 1945, it unveiled an improved version of the successful E6, designated the E7. A pair of 567A prime movers, rated at 2000 total horsepower, now supplied power. Most of the notable changes were seen on the body and included a new and much smaller bulldog nose, as well as a large, vertical louver or screen panels directly behind the cab doors.

Introduced just as American railroads began upgrading and rebuilding passenger service, the E7 was the most successful passenger diesel ever built, with 428 A units and 82 cabless B units produced through April of 1949 when the E8 was unveiled.

As with most of its diesels, buyer's could specify certain appliances such as air horns, pilots and so on, but EMD also made several changes to the basic body of the E7 during the production run. Phase II units were easily spotted by the differences in the middle side panel, which housed several screened filters in place of the double-windows seen on earlier models. An additional air intake was also installed at the upper rear of the body.

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