In the 1960s, Pilatus began to consider updating the P-3 into a much more formidable aircraft by fitting it with a turboprop engine. The first example, originally designated the "P-3B" and then the "PC-7 Turbo-Trainer", was the P-3 prototype reengined with a Pratt & Whitney Canada (PWC) PT6A-20 turboprop engine with 410 skW (550 SHP). It performed its first flight on 12 April 1966, but after it was damaged in a forced landing, the company shelved the project.

It was revived in 1973, with Pilatus reengining a Swiss Air Force P-3 with a PWC PT6A-25 turboprop engine, normally rated at 485 skW (650 SHP) but limited to 410 skW (550 SHP) and driving a three-bladed propeller. This second prototype, designated the "PC-7 Turbo Trainer", performed its first flight on 12 May 1975, with test pilot Hans Galli at the controls. A second prototype with considerable improvement followed; the first production machine, again flown by Galli, took to the air on 18 August 1978.

As it emerged, the PC-7 featured a new one-piece wing, with integral leading-edge fuel tanks; redesigned, stronger landing gear to handle take-off weight that had increased by 57%; a redesigned tail assembly, a framed back-sliding bubble canopy providing much improved visibility; and a modernized cockpit layout. The cockpit was unpressurized and lacked ejection seats.

Since its introduction in 1978, close to 500 aircraft have been sold, with the majority still being in service today. The aircraft’s capability to cover all aspects of basic training including aerobatics, instrument, tactical and night flying, has convinced 20 air forces to select the PC-7 to their pilots.

The Royal Netherlands Air Force aquired ten PC-7 trainers in 1989 as elementary and lead in trainer with 131 Squadron at Woensdrecht Air Base. All pilots of the RNLAF, either helictopter, transport or F-16, start in the PC-7 Turbo Trainer in a 7 months course,before going to the specific type training that mainly takes place in the U.S.A. In 1997 again three examples where ordered making the tolal of the PC-7 fleet thirtheen aircraft. This expansion was neccessary because of the increasing demand for pilots. This was also stimulated because of the introduction of the many new helicopter types around that time. Since a few years the Royal Netherlands Navy also use the PC-7's at Woensdrecht for their pilot training.

Since 2006 the colours of the PC-7's where being changed from bright yellow with red stripes to glossy black with yellow stripes. After studies of TNO showed this would improve visibillity and thus safety for the crew.