With this win, India have taken a commanding 3-0 lead and are just one win away from annexing the Pepsi Cup.
Earlier, a 143-run fifth-wicket partnership between Yuvraj Singh and Suresh Raina pulled India out of trouble and posted a huge score of 294 for six after their captain Rahul Dravid had elected to bat on winning the toss.
Yuvraj Singh was the toast of the Indian innings, smashing a 77 ball 103, while Raina backed him up with a 68-ball 61.
Chasing the huge score on a wicket which was getting slower was never going to be an easy task and England needed a good launching pad for that.
However, Pathan saw that this did not happen as he first got opener Andrew Strauss to a loose shot outside the off stump for the edge, to be taken by Mahendra Singh Dhoni behind the stumps for 7 with England on 8 for one.
Four overs later Pathan again struck when he castled Ian Blackwell for nine to leave England gasping at 27 for two.
The lad from Vadodara, however, was still not done and soon had had Owais Shah. The Pakistani-born batsman tried to drive him, but it went uppishly in the direction of point where Yuvraj took a good catch. Shah made six and England were 37 for three. Captain Andrew Flintoff then marched in to the middle to join opener Matthew Prior, who was batting beautifully.
The two started rebuilding the innings and took the score to 78 when the tragedy struck.
After hitting Harbhajan for a four, Prior played next ball on the off side and called for a run, but Flintoff sent him back and Yuvraj with a direct hit had him short of his crease. Prior went back to the pavilion after a well made 37.
In the next over, off spinner Ramesh Powar struck when he had the England captain holing out to deep midwicket for 15 with England on 83 for five.
Vikram Solanki also left soon after for 10 which included a huge six, by giving an easy catch to Yuvraj at point of Harbhajan Singh and England further slumping to 100 for 6.
Collingwood then found an able ally in wicket keeper Geraint Jones, and the two slowly but surely started picking up the pieces of the England innings.
The two resisted the Indian attack and in fact took the fight to the hosts as they put on a fabulous partnership of 105 runs for the seventh wicket, before G Jones holed out to deep square leg where Virendra Sehwag took a well-judged catch off Irfan Pathan. Jones made 32 of 42 deliveries and was studded with a six.
Collingwood, after playing the lone hand made a brilliant 82-ball 93, studded with 10 boundaries, had little support from the other batsmen, and was left to rue another defeat.
For India, Irfan Pathan with four for 51 was the most successful bowler, while spinners Harbhajan Singh and Ramesh Powar also chipped in with important wickets as India completed their third successive victory.
Earlier, India were rescued by a superb 143-run fifth wicket partnership between Yuvraj Singh and Suresh Raina as the two took India from 130 for four in the 28th over to a commanding position of 294 for six. Yuvraj, who started confidently, took on the England captain to get a four through the slip cordon. Raina then taking cue, hit two glorious boundaries off Liam Plunkett.
Raina also had a slice of luck as wicket keeper Geraint Jones missed an easy stumping chance off Ian Blackwell when the UP southpaw was just on 13.
After this, there was no looking back as Yuvraj reached his half century in just 49 balls with six boundaries.
He unleashed himself from there and belted the England bowlers all over the park.
Raina also reaching his second consecutive half century with four boundaries and a six.
The two put on 143 for the fifth wicket before Yuvraj was dismissed in the 48th over for 103 caught by Collingwood of the bowling off Flintoff for 103. His knock came in just 77 balls and had 10 boundaries and three sixers in it.
Dhoni then came in and joined in the act making a quick fire unbeaten 13 of six balls with one four and a six.
Raina was dismissed in the last over for 61 by Flintoff. His 68-ball knock had five boundaries and a six.
Before that, Dravid himself came out to open with Virender Sehwag, as India dropped Gautam Gambhir and played five bowlers including Ajit Agarkar and debutant Munaf Patel.
Dravid opened out in the third over with a beautiful square drive of Anderson to the point boundary and then Sehwag also tried to get back his form with a boundary over the cover region of Mahmood.
However, just when it seemed like Sehwag was recapturing his old form, he once again tried to drive Anderson on the up but could only manage to drag the ball onto his stumps to be dismissed for 15 with the team score on 27.
Pathan was then promoted to number three and he, in the company of his captain Dravid, steadied the innings, putting on a valuable partnership of 78, before Dravid edged a delivery from Collingwood onto the stumps. His 46 which came in 59 balls and had six boundaries.
A mini collapse then saw India in a spot of bother as Pathan for 36 and Mohd Kaif for zero were dismissed in qiuck succession to leave India at 130 for 4.
England had to leave out their main batsman Kevin Pietersen through injury and also left out Kabir Ali bringing in Vikram Solanki and Sajid Mahmood in their place.