The W07 was designed in Brackley under the direction of Paddy Lowe, Aldo Costa, Geoff Willis, Loic Serra, and several other senior engineers, with power supplied by the Mercedes-Benz PU106C Hybrid unit built at Brixworth by Mercedes AMG High Performance Powertrains. The power unit output was estimated at between 950 and 1,000 horsepower, exceeding the competing Ferrari, Renault, and Honda units. Mercedes described the car as representing "mini revolutions" over its predecessor, the F1 W06 Hybrid.
In-season development was continuous. An evolved S-duct improved airflow efficiency along the length of the car. At the Canadian Grand Prix, L-shaped turning vanes were introduced under the chassis alongside new bargeboards and revised front wing fins. A bowl-shaped rear wing, introduced at the same race, allowed top speeds above 350 km/h by reducing drag. At Singapore, Mercedes trialled a hydraulic third suspension element mounted transversely in the upper chassis bulkhead to manage ride height and roll. Concave-surface brake discs were also developed during the season to manage heat dissipation and keep tyre temperatures consistent.
The car was shaken down at Silverstone on 19 February 2016, then officially launched online on 21 February. It completed 1,294 laps — equivalent to over 19 race distances — during eight days of pre-season testing at Circuit de Barcelona-Catalunya.
Hamilton and Rosberg began the year trading wins. Rosberg scored early victories at Bahrain, China, and Russia — including a career Grand Slam at the latter — while Hamilton took Monaco and Canada. The season's defining incident came at the Spanish Grand Prix, where the drivers collided on the opening lap, retiring both cars and handing Max Verstappen a debut victory for Red Bull.
The W07 then delivered ten consecutive wins from Monaco through Singapore, a sequence one short of the all-time record set by McLaren in 1988. Mercedes broke their own single-season win record of 16 with their 17th victory at Mexico, and Hamilton's record-setting 19th pole of the season at Brazil surpassed the previous mark of 18.
Reliability and start procedure problems provided the main weaknesses. A clutch-related hardware issue caused poor starts at several races, and power unit failures affected multiple events — most critically at Malaysia, where Hamilton retired from the lead while Rosberg recovered from a first-lap collision to take third, extending his championship advantage to 23 points with five rounds remaining.
The Constructors' Championship was sealed at Japan with four races to spare, giving Mercedes their third consecutive title. The Drivers' Championship went to a final-race decider at Abu Dhabi.
Hamilton, trailing by five points, took pole and the race lead. Rosberg lost time with a lengthy pit stop but recovered to run second. Hamilton slowed deliberately in the final laps in an attempt to allow cars behind to pressurize Rosberg, ignoring multiple team radio instructions to increase pace. Rosberg successfully defended second place from Sebastian Vettel and Max Verstappen, finishing 0.4 seconds behind Hamilton. Rosberg was crowned 2016 World Drivers' Champion with 385 points to Hamilton's 380 — a margin of five points. It was Rosberg's maiden and only world title, and the last Formula One race of his career.
The W07 ended 2016 with 765 constructors' points, surpassing the team's own record of 703 set in 2015, and defeating second-placed Red Bull by 297 points — the largest margin between champion and runner-up in the sport's 67-year history at that point. As of 2024, the car holds Formula One season records for most pole positions as a percentage (20 poles, 95.2%) and most podiums (33).