For the 2007 NFL season Sanders was named AFC Defensive Player of the Week for Week 2, following the 11 tackles and 2.5 sacks he recorded against division rival Tennessee Titans at Nashville. He was largely responsible for shutting down Vince Young at the end of the game, clinching the victory for the Colts 22-20. Sanders ended the year with 96 total tackles, 3.5 sacks, two interceptions and six pass deflections. With him in the lineup, the Colts again fielded one of the best pass defenses in the league while also leading a successful run stopping defense. Sanders was noted by coach Tony Dungy as a prototypical safety for his Tampa 2 defense and became known for his coming down into the box on run support as a big factor in the Colts' run defense.
On December 28, 2007, Sanders was signed to a five-year, $37.5 million contract with $20 million guaranteed. At the time, the contract made him the highest paid safety in the history of the NFL.