She was lost in a collision with a friendly escort ship at night in late January 1942, when both vessels were operating without navigation lights to avoid detection by enemy forces.

Cruising from California ports, mainly Mare Island, San Diego, and San Pedro, S-26 served in the Panama Canal area from March to May 1927, visited Hawaii again during the summers of 1927 to 1928, again served in the Panama Canal area in February 1929, and made visits to Hawaii during the summers of 1929 and 1930.

[2] After the vessels were at sea in the Gulf of Panama, PC-460 made a visual signal at 22:10 to the submarines that she intended to make a wide, 180-degree turn to starboard to return to port and that they could proceed with their assigned duties.

[1][2] S-26 sank by the bow in less than a minute in 300 feet (91 m) of water about 14 nautical miles (26 km; 16 mi) west of San Jose Light.

[1][2] Rescue operations began on the morning of 25 January 1942, with divers making 25 dives to the wreck over the following days in the hope of finding men still alive in S-26′s hull, but they found no signs of life.