The Battle of Santa Cruz Islands took place on 26 October 1942 without contact between surface ships of the opposing forces. That morning, Enterprise's planes bombed the carrier Zinho, while planes from Hornet severely damaged the carrier Shokaku and the heavy cruiser Chikuma. Two other cruisers were also attacked by Hornet's warplanes. Meanwhile, Hornet was attacked by a coordinated dive bomber and torpedo plane attack. In a 15-minute period, Hornet was hit by three bombs from Aichi D3A "Val" dive bombers. One "Val", after being heavily damaged by anti-aircraft fire while approaching Hornet, crashed into the carrier's island, killing seven men and spreading burning Avgas over the deck. Meanwhile, a flight of Nakajima B5N "Kate" torpedo planes attacked Hornet and scored two hits, which seriously damaged the electrical systems and engines. As the carrier came to a halt, another damaged "Val" deliberately crashed into Hornet's port side near the bow.

With power knocked out to her engines, Hornet was unable to launch or land aircraft; forcing its aviators to either land on Enterprise or ditch in the ocean. Rear Admiral George D. Murray ordered the heavy cruiser Northampton to tow Hornet clear of the action. Since the Japanese planes were attacking Enterprise, this allowed Northhampton to tow Hornet at a speed of about five knots (9 km/h; 6 mph). Repair crews were on the verge of restoring power when another flight of nine "Kate" torpedo planes attacked. Eight of these aircraft were either shot down or failed to score hits but the ninth planted a torpedo into Hornet's starboard side; which proved to be the fatal blow. The torpedo hit destroyed the repairs to the electrical system and caused a 14-degree list. After being informed that Japanese surface forces were approaching and that further towing efforts were futile, Vice Admiral William Halsey ordered Hornet sunk, and an order of "abandon ship" was issued. Captain Charles P. Mason, the last man on board, climbed over the side, and the survivors were soon picked up by the escorting destroyers.

American warships next attempted to scuttle the stricken carrier, which absorbed nine torpedoes, many of which failed to explode, and more than 400 5-inch (130 mm) rounds from the destroyers Mustin and Anderson. The destroyers steamed away when a Japanese surface force entered the area. The Japanese destroyers Makigumo and Akigumo finally finished off Hornet with four 24-inch (610 mm) Long Lance torpedoes. At 01:35 on 27 October, Hornet was finally sunk with the loss of 140 of her sailors.

Hornet was struck from the Naval Vessel Register on 13 January 1943. However, her name was revived less than a year later when one of the newly constructed Essex-class aircraft carrier was commissioned as USS Hornet (CV-12). 

Other than the light carrier Princeton and a number of smaller escort carriers, Hornet was the last American carrier ever sunk by enemy fire.