At 20.47 hours on 4 July 1943 U-409 fired one G7e torpedo at the City of Venice (Master James Wyper) in station #21 of convoy KMS-18B and struck her on the starboard side at the after end of #2 hold while steaming on a zigzag course at 7 knots in fine weather and moderate sea about 10 miles north of Cape Tenes, Algeria. The ship was carrying 292 troops of the 1st Canadian Division and ten naval personnel for Operation Husky, the invasion of Sicily. The explosion blew away lifeboat #1, threw the landing craft stowed across the fore end of #2 hold forward and set the petrol in the vehicles transported in this hold on fire. The crew stopped the engines and immediately tried to extinguish the fire, but the deck water service pipes had been destroyed, the auxiliary pump was out of action and to spray a 30 gallon fire foam container was not sufficient to control the fire. The beam and hatches in the main and tween decks had also been blown away, causing water to pour into #3 hold over the tween deck and the ship to settle very quickly by the head, first listing slightly to starboard, then going over to a list of approx. 10° to port and eventually coming back to a 5° list to starboard. The master ordered most of the 158 crew members, 22 gunners (the ship was armed with one 4in, one 12pdr and eight 20mm guns) and all passengers to abandon ship in six of the lifeboats, keeping lifeboat #8 alongside for the skeleton crew remaining behind and placing an emergency wireless set in lifeboat #2. Unfortunately the lifeboat #6 was swamped when the falls were let go too quickly and all occupants thrown into the sea, drowning two Indian crew members. A total of 19 rafts and two floats were released and all troops were clear of the ship by 21.30 hours with the exception of 25 to 30 men who volunteered to remain on board in case they could help in any way. However, the fire was spreading rapidly to the after end of the tween deck and frequent explosions were heard, presumably from tins of petrol and oil stowed in the forward holds. Due to the eminent danger of the flames reaching the ammunition magazine forward and the petrol stowed between the after end of #2 hatch and the dining saloon, the master decided to abandon the City of Venice after having considered to beach her on the nearby coast. Some men then went into lifeboat #8 which cleared the ship at about 22.00 hours to pick up men swimming in the water nearby and had not yet returned when HMS Teviot (K 222) (Cdr T. Taylor, DSC, RN) came alongside on port side near #3 hatch. The chief officer, second officer, seventh engineer officer, ten gunners and the soldiers who had remained behind boarded the frigate as quickly as possible until the ship was completely abandoned by 22.20 hours. However, the lifeboat #8 with about 60 occupants was capsized in an unfortunate accident when it fouled the starboard quarter of the rescue vessel, throwing all men into the sea between the ships. The master, eight crew members, one gunner and ten military passengers, including the officer in command of the troops, were lost from this boat. City of Venice well down by the head and on fire fore and aft by 23.30 hours and was seen to sink by the bow at 05.30 hours on 5 July. The landing craft HMS LCE-14 was lost with the ship.

HMS Teviot (K 222) picked up a total of 204 survivors, the remaining survivors being rescued by HMRT Restive (W 39) (Lt D.M. Richards, RNR) and HMS Rhododendron (K 78) (Lt O.B. Medley, RNVR). They were all landed at Algiers on 5 July.

May 2014 by Eric Zimmerman:
The loss of City of Venice was earlier attributed to U-375 (Könenkamp), but newer research shows that the ship was torpedoed one hour earlier and must have been hit by U-409 which was lost before being able to report its success.