Jonada Avdia had been playing in the sea in the southern part of the country when she was hit and killed by the boat at 2pm on Tuesday.
The police officer on duty, Arjan Tase, has since been arrested on suspicion of manslaughter.
Pictures have emerged of the moment the schoolgirl’s distraught father Bledar Avdia reportedly confronted the policeman.
The pictures, posted online by Albania’s former prime minister Sali Berisha, show two men, both in swimming shorts, locking arms as people try to separate them.
Speaking to local news media, Albanian national Mr Avdia said: “I was swimming with my daughter near the shore, I saw a white boat with two people on board.
“The boat parked on the beach near a hotel and I saw a girl get off from there.”
The father recalled how a woman and children got into the boat and it again went through an area closed to swimmers.
“It came in our direction and came at a hellish speed and separated me and the girl,” he said
“I dove underwater and the craft hit my daughter with the engine section and cut her all over.”
Bislim Ahmetaj, a teacher who was at the beach the day of the incident, recalled how Mr Bledar came up to him afterwards and said: “I should have died instead of her.”
In an emotional Facebook post, he wrote: “Albanians mourn Jonada and her family, while for you, [alleged] killer of children and dreams, there will be no grave.
“Justice for Jonada should and will be decided by Albanian citizens.”
Jonada’s uncle, Ismet Avdia, shared a photo of the young girl when he announced her death on Facebook.
“Friends, we inform you with deep sadness of the death of our niece Jonada Bledar Avdia at the age of 7 from a tragic accident on Himara beach,” he wrote.
Another 15 police officers who were meant to guard the water at the time of the incident have been fired.
Police have said Tase was throwing members of his family on the shore of Potam Beach when the crash happened.
After his relatives disembarked, he put the boat back into the water in the same area and hit Jonada while she was only 15 feet from shore.
The tragic incident has sparked anti-police protests across the country as marchers clashed with officers in the capital Tirana on Thursday.
The protesters are calling for the interior minister, the police chief and the tourism minister to resign as a result of Jonada’s death.