Extract large archive with 7-zip

Are you dragging and dropping the files using the GUI?

If you use the option in the shell to "Extract to here" or even the button "Extract" in the file manager GUI, that should not happen anymore, as 7-Zip should be able to bypass the need to use a temporary directory altogether.

This is explained in the Why does drag-and-drop archive extraction from 7-Zip to Explorer use temp files? FAQ entry:

7-Zip doesn't know folder path of drop target. Only Windows Explorer knows exact drop target. And Windows Explorer needs files (drag source) as decompressed files on disk. So 7-Zip extracts files from archive to temp folder and then 7-Zip notifies Windows Explorer about paths of these temp files. Then Windows Explorer copies these files to drop target folder.

To avoid temp file usage, you can use Extract command of 7-Zip or drag-and-drop from 7-Zip to 7-Zip.