2 August 1943 in the North Atlantic north-west of Cape Ortegal, U-106 was spotted by a Sunderland flying boat of 228 Squadron flown by Flying Officer Reader Hanbury. Although the anti-aircraft guns on U-106 fended off the flying boat, U-106 was finished off by another Sunderland of No. 461 Squadron RAAF flown by Flight Lieutenant A.F. Clarke.

According to the Allied crews and photographs taken of the attack, the U-Boat partially exploded, before sinking vertically. 22 of U-106's 48-man crew were killed. The survivors were later picked up by German E-boats.