The accident occurred around lunchtime on Monday on a bridge over the Ore Lake, in Furudal, central Sweden.
The car crashed into the lake's chilly waters before sinking an estimated 15 metres to the lake's muddy bottom.
"I saw a hand pressed against the window when the car sunk," one witness named Åke, 71, told the Aftonbladet newspaper.
Rescue efforts were hampered by poor visibility on the muddy lakebed as well as a strong current of the Ore River.
Emergency crews finally located the car around 2am with the help of a depth sounder following more than 12 hours of intensive searching.
"We found it about 50 or 60 metres from the bridge. It was upside down," emergency team leader Jan Daniels told Aftonbladet.
Inside the vehicle, divers found a female victim.
According to Aftonbladet, she was around 75-years-old and lived in the area.
Around 5.30am, crews were working to retrieve the car from the bottom of the lake.
Where the vehicle was heading and what may have caused it to drive off the bridge into the water remains a mystery.