Witnessing the events of the war, US Army observers realized that they would need a self-propelled artillery vehicle with sufficient firepower to support armored operations. Lessons learned with half-tracks (such as the T19) also showed that this vehicle would have to be armored and fully tracked. It was decided to use the M3 Lee chassis as the basis for this new vehicle design, which was designated T32.

After reworking the M3 by providing an open-topped superstructure, mounting a 105 mm howitzer and, following trials, adding a machine gun, the T32 was accepted for service as the M7 in February 1942 and production began that April.

While the first M7s were produced for the U.S. Army, supply was soon diverted to support the Lend-Lease program. Ninety M7s were sent to the British 8th Army in North Africa, who were also the first to use it in battle during the Second Battle of El Alamein as well as their own Bishop,a 25 pounder gun howitzer armed self propelled gun. The M7 soon proved successful and the British requested 5,500 of them, an order which was never fully completed.

They did find problems with the M7 though, as the primary armament was of US, not British standard. This meant that the M7s had to be supplied separately, causing logistical complications. It was a problem that was only truly resolved in 1943 on arrival of the 25-pounder-armed Sexton developed by the Canadians on a similar chassis. Until that time though, the British continued to use the M7 throughout the North African Campaign, the Italian Campaign and even a few during the early days of the Normandy Invasion. After the Sexton appeared, most British M7s were converted into "Kangaroo" armored personnel carriers.

In U.S. service the M7 was a great success. Each U.S. armored division had three battalions of M7s, giving them unparalleled mobile artillery support.

A total of 3,490 M7s were built and they proved to be reliable weapons, continuing to see service in the U.S. and allied armies well past World War II.