Cowes RNLI and Gosport Independent Lifeboat raced to the scene of the incident to the East of Bramble Bank at 13:00 after a Mayday was received by HM Coastguard.
The seven, two of them women, were aboard the Cowes-based Corby 36 yacht Ino, which was in collision with the yacht Valkyrie.
Although the Ino sank very quickly, fortunately all seven were already wearing lifejackets. After first being picked up by a passing RIB they were transferred to the Gosport lifeboat which was soon joined on the scene by the Cowes lifeboat.
Both lifeboats then proceeded to Trinity Landing in Cowes, where some of the survivors were given blankets rushed from the Cowes lifeboat station.
The Needles Coastguard Rescue Team were tasked to meet the casualties and lifeboat crews.
UPDATE SUNDAY: The stricken yacht Ino has been towed into Cowes today for damage assessment, removing the wreckage from the busy Solent.