<PAGE>   1
                                                                    EXHIBIT 10.7

                               LEASE MODIFICATION
                             AND EXTENSION AGREEMENT

              THIS LEASE MODIFICATION AND EXTENSION AGREEMENT is made and
entered into this 30th day of November, 1999, by and between AMB PROPERTY, L.P.,
a Delaware limited partnership (hereinafter referred to as "Lessor"), and
MEDWAVE, INC., a Minnesota corporation (hereinafter referred to as "Lessee").

                                   WITNESSETH:

              WHEREAS, Lessor and Lessee have entered into a lease agreement
dated the 10th day of April, 1997 (hereinafter referred to as "Lease"), whereby
Lessor leased to Lessee certain premises in the building situated at 4354 - 4396
Round Lake Road West, City of Arden Hills, State of Minnesota; and

              WHEREAS, Lessor is successor in interest to Round Lake LLC; and

              WHEREAS, it is the desire of the Lessor and the Lessee to add to
the terms of the Lease.

              NOW, THEREFORE, in consideration of the mutual promises of the
parties hereto, it is agreed as follows:

              1. EXTENSION OF LEASE TERM. The term of this Lease is hereby
              extended for a period of two (2) years, from June 1, 2000 through
              May 31, 2002 (the "Extended Term").

              2. RENT. Lessee agrees to pay as Base Monthly Rental during the
              extended term the sum of Three Thousand Thirty-six and 50/100
              Dollars ($3,036.50), which equates to Thirty-six thousand four
              hundred thirty-eight and 00/100 Dollars ($36,438.00) per year.

              3. ENTIRE AGREEMENT. This Lease Modification and Extension
              Agreement, the Lease and Exhibits thereto set forth all covenants,
              promises, agreements, conditions and understandings between Lessor
              and Lessee concerning the Leased Premises. No representations,
              warranties, undertakings or promises, whether oral, implicated,
              written or otherwise, have been made by either party hereto to the
              other unless expressly stated in this Lease Modification and
              Extension Agreement or unless mutually agreed to in writing
              between the parties hereto after the date hereof, and neither
              party has relied upon any verbal representations, agreements, or
              understandings not expressly set forth herein. Except as herein
              otherwise provided, no subsequent alteration, amendment, change or
              addition to this Lease shall be binding upon Lessor or Lessee
              unless reduced to writing and signed by them. All other terms and
              conditions as stated in the Lease remain in full force and effect.



     LESSEE:                                      LESSOR:

     MEDWAVE, INC.                                AMB PROPERTY, L.P.
     A MINNESOTA CORPORATION                      A DELAWARE LIMITED PARTNERSHIP

     BY:  /S/ Kent Archibald                      By: AMB Property Corporation
          -------------------------                   a Maryland Corporation
                                                  Its: General Partner