New multiband CCD photometry is presented for V407 Peg; the R_C_ light curves are the first ever compiled. Our light curves, displaying a flat bottom at secondary minimum and an O'Connell effect, were simultaneously analyzed with the radial velocity (RV) curves given by Rucinski et al. The light changes of the system are best modeled using both a hot spot on the secondary star and a third light. The model also represents historical light curves. All available minimum epochs, including our six timing measurements, have been examined and they indicate that the eclipse timing variation is mainly caused by light asymmetries due to the spot activity detected in the light-curve synthesis. The hot spot may be produced as a result of the impact of the gas stream from the primary star. Our light and velocity solutions indicate that V407 Peg is a totally eclipsing A-type overcontact binary with values of q=0.251, i=87.6{deg}, {Delta}T=496K, f=61%, and l_3_=11~16%. Individual masses and radii of both components are determined to be M_1_=1.72M_{sun}_, M_2_=0.43M_{sun}_, R_1_=2.15R_{sun}_, and R_2_=1.21R_{sun}_. These results are very different from previous ones, which is probably caused by the light curves with distorted and inclined eclipses used in those other analyses. The fact that there are no objects optically related to the system and that the seasonal RVs show a large discrepancy in systemic velocity indicates that the third light source most likely arises from a tertiary component orbiting the eclipsing pair.