Degenkolb powered clear of his rivals at the Motorland Aragon racing circuit and held off a late surge from Italian Elia Viviani (Liquigas) to take the win and extend his lead in the green jersey points classification.
The 23-year-old German enjoyed yet another superb lead out by his Argos-Shimano team-mates - and in particular Dutchman Koen de Kort - at the conclusion of the 164km stage from Huesca in northern Spain.
"It's really crazy because I think no one expected me to win three stages on the Vuelta," said Degenkolb. "Today it was a big fight but we showed a lot of confidence from the beginning by riding on the front and bringing back the break."
"I have so many thanks for the boys - they made such a big effort," Degenkolb added, before claiming his victory on Friday had been the hardest of his three triumphs in the opening week of the 67th edition of the Vuelta.
Degenkolb now leads Viviani by 76 points to 47 in the green jersey standings.
Another sweltering day in Spain saw no major changes in the general classification, where Spain's Joaquim Rodriguez (Katusha) leads Britain's Chris Froome (Team Sky) by 10 seconds and follows Spaniard Alberto Contador (Saxo Bank-Tinkoff) by 36 seconds.
Stage seven kept to the script, with an early break of four riders - Spaniards Pablo Lechuga (Andalucia) and Javier Aramendia (Caja Rural), Czech Frantisek Rabon (Omega Pharma-Quick Step) and Dutchman Bert-jan Lindeman (Vacansoleil-DCM) - breaking clear after two kilometres, building up a maximum lead of five minutes and then being swept up inside the final 20km.
With around 9km remaining, a crash in the middle of the peloton brought down half a dozen bodies and held up around 50 riders. Team Sky took over the pace-setting on the front of the peloton, stringing out the race as they bid to set up their man Ben Swift.
Such was the tempo being set by Sky that last year's runner-up Froome, Spanish veteran Juan Antonio Flecha and British national champion Ian Stannard forced a mini-split on the front of the peloton as the race entered the motor racing circuit at Alcaniz.
Despite - or perhaps because of - the fast pace, Swift was unable to deliver in the final sprint, the 24-year-old Briton sitting up and settling for 10th place after another disappointing finish.
Degenkolb, full of confidence and champing at the bit, took the race to his rivals as he opened up the sprint early on the wide and flat closing straight. Viviani managed to hold his wheel but was unable to pass Degenkolb and was forced to settle for second place.
Australia's Allan Davis (Orica-GreenEdge) and French national champion Nacer Bouhanni (FDJ-BigMat) were shoulder-to-shoulder as they took third and fourth respectively ahead of Italian veteran Daniele Bennati (RadioShack-Nissan).
Swift was not the only Team Sky rider suffering an off-day: Colombian Rigoberto Uran struggled to keep up with the pace set by his team-mates in the final kilometres and finished more than one minute in arrears. Olympic road race silver medallist Uran drops from fourth to 12th on GC, 1:49 behind the red jersey Rodriguez.
The Vuelta continues on Saturday with the gruelling 175km stage eight, which culminates with the Cat.1 climb of Collada de la Gallina in Andorra.