Vettel, who drove most of the race with steering issues, crossed the line 0.9 seconds ahead of Raikkonen to secure Ferrari's second one-two of the season.
Lewis Hamilton ceded third to Valtteri Bottas on the final lap as agreed after his teammate had let him through under team orders earlier in the race to try and attack the Ferraris.
It was Vettel's fourth win of the season, his first since Monaco in May and the 46th of his career. It helped him extend his championship lead to 14 points over Hamilton heading into the summer break.
Vettel and Raikkonen stayed one-two after the start, with the Red Bulls of Daniel Ricciardo and Max Verstappen swarming the Mercedes of Bottas and Hamilton.
Verstappen got around the outside of Hamilton with a bold move into Turn 1, but ran wide on the exit and then came under pressure from Ricciardo.
Verstappen locked up into Turn 2 and ran into Ricciardo, causing damage to the left-hand side of his teammates Red Bull but escaping unharmed himself.
Ricciardo, who was furious with Verstappen on the radio, dropped down the field and then spun at Turn 4, with fluid leaking from his car, forcing Jolyon Palmer off track to avoid contact.
He then pulled over to the side of the track and retired the car, bringing out the safety car.
The stewards investigated the incident and deemed Verstappen to be at fault, handing him a 10-second time penalty.
Vettel led comfortably from Raikkonen, but as the approached the first round of stops, he started reporting steering issues.
Bottas was the first of the frontrunners to pit, with Hamilton, Vettel and Raikkonen following suit on successive laps, allowing Verstappen to lead.
Vettel moved back in front when Verstappen eventually pitted, with Raikkonen calling on his Ferrari team to ask Vettel, who was struggling to turn in, to cede position as the two Mercedes were closing but the request was not accepted.
At the same time, Hamilton asked Mercedes to get Bottas to move over, as he felt he was quicker, and the team agreed, on the proviso he gave the position back if he couldn't pass Raikkonen.
Bottas accepted the order, running deep into Turn 1 to allow Hamilton to lead and immediately, Hamilton began to pull a gap, and within a few laps he was on Raikkonen's gearbox.
Hamilton was told he had five laps to get by Raikkonen or he would have to give the position back, and though he closed to within a second, he couldn't find a way past.
Mercedes extended that deadline to allow him to keep the pressure on but with just a few laps to go, Hamilton backed off and gave up the chase.
He then allowed Bottas through to take third, with Verstappen just 0.3s adrift in third.
Fernando Alonso scored McLaren's best finish of the season with sixth, while Stoffel Vandoorne made it both cars in the points with 10th.
Toro Rosso's Carlos Sainz was seventh, with Force India's Sergio Perez and Esteban Ocon eighth and ninth respectively.
Grosjean, who made contact with Nico Hulkenberg and Marcus Ericsson at the start, was forced to pull over and retire the car after the team suspected a crossed wheelnut after his pitstop.
Paul di Resta, who was standing in for Felipe Massa because of illness, was told to retire in the closing stages because the team spotted a problem with his Williams.
Hulkenberg pitted to retire the car on the penultimate lap, while Kevin Magnussen was handed a five-second time penalty for hitting the Renault earlier in the race.
28-30 Jul 2017 Hungaroring, Budapest
1 | 5 | Sebastian Vettel | FERRARI | 70 | 1:39:46.713 | 25 |
2 | 7 | Kimi Räikkönen | FERRARI | 70 | +0.908s | 18 |
3 | 77 | Valtteri Bottas | MERCEDES | 70 | +12.462s | 15 |
4 | 44 | Lewis Hamilton | MERCEDES | 70 | +12.885s | 12 |
5 | 33 | Max Verstappen | RED BULL RACING TAG HEUER | 70 | +13.276s | 10 |
6 | 14 | Fernando Alonso | MCLAREN HONDA | 70 | +71.223s | 8 |
7 | 55 | Carlos Sainz | TORO ROSSO | 69 | +1 lap | 6 |
8 | 11 | Sergio Perez | FORCE INDIA MERCEDES | 69 | +1 lap | 4 |
9 | 31 | Esteban Ocon | FORCE INDIA MERCEDES | 69 | +1 lap | 2 |
10 | 2 | Stoffel Vandoorne | MCLAREN HONDA | 69 | +1 lap | 1 |
11 | 26 | Daniil Kvyat | TORO ROSSO | 69 | +1 lap | 0 |
12 | 30 | Jolyon Palmer | RENAULT | 69 | +1 lap | 0 |
13 | 20 | Kevin Magnussen | HAAS FERRARI | 69 | +1 lap | 0 |
14 | 18 | Lance Stroll | WILLIAMS MERCEDES | 69 | +1 lap | 0 |
15 | 94 | Pascal Wehrlein | SAUBER FERRARI | 68 | +2 laps | 0 |
16 | 9 | Marcus Ericsson | SAUBER FERRARI | 68 | +2 laps | 0 |
17 | 27 | Nico Hulkenberg | RENAULT | 67 | DNF | 0 |
NC | 40 | Paul di Resta | WILLIAMS MERCEDES | 60 | DNF | 0 |
NC | 8 | Romain Grosjean | HAAS FERRARI | 20 | DNF | 0 |
NC | 3 | Daniel Ricciardo | RED BULL RACING TAG HEUER | 0 | DNF | 0 |
Note - Magnussen had 5 seconds added to his race time for forcing another driver off the track.
1 | Sebastian Vettel | GER | FERRARI | 202 |
2 | Lewis Hamilton | GBR | MERCEDES | 188 |
3 | Valtteri Bottas | FIN | MERCEDES | 169 |
4 | Daniel Ricciardo | AUS | RED BULL RACING TAG HEUER | 117 |
5 | Kimi Räikkönen | FIN | FERRARI | 116 |
6 | Max Verstappen | NED | RED BULL RACING TAG HEUER | 67 |
7 | Sergio Perez | MEX | FORCE INDIA MERCEDES | 56 |
8 | Esteban Ocon | FRA | FORCE INDIA MERCEDES | 45 |
9 | Carlos Sainz | ESP | TORO ROSSO | 35 |
10 | Nico Hulkenberg | GER | RENAULT | 26 |
11 | Felipe Massa | BRA | WILLIAMS MERCEDES | 23 |
12 | Lance Stroll | CAN | WILLIAMS MERCEDES | 18 |
13 | Romain Grosjean | FRA | HAAS FERRARI | 18 |
14 | Kevin Magnussen | DEN | HAAS FERRARI | 11 |
15 | Fernando Alonso | ESP | MCLAREN HONDA | 10 |
16 | Pascal Wehrlein | GER | SAUBER FERRARI | 5 |
17 | Daniil Kvyat | RUS | TORO ROSSO | 4 |
18 | Stoffel Vandoorne | BEL | MCLAREN HONDA | 1 |
19 | Jolyon Palmer | GBR | RENAULT | 0 |
20 | Marcus Ericsson | SWE | SAUBER FERRARI | 0 |
21 | Antonio Giovinazzi | ITA | SAUBER FERRARI | 0 |
1 | MERCEDES | 357 |
2 | FERRARI | 318 |
3 | RED BULL RACING TAG HEUER | 184 |
4 | FORCE INDIA MERCEDES | 101 |
5 | WILLIAMS MERCEDES | 41 |
6 | TORO ROSSO | 39 |
7 | HAAS FERRARI | 29 |
8 | RENAULT | 26 |
9 | MCLAREN HONDA | 11 |
10 | SAUBER FERRARI | 5 |
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