Ravaged by injury, without their skipper and barely competitive less than two weeks ago, the English overcame disastrous starts with both bat and ball to claim the first game of the best-of-three finals series, making 253 for six in reply to Australia's 252 to win with three balls to spare on Friday.
The second final is in Sydney on Sunday and the English are just one win away from a fairytale end to an horrific tour that saw them lose the Ashes 5-0.
Collingwood, himself enjoying a renaissance after struggling since the early part of the tour, scored his second successive century and was the star as the English caused a major upset, with 120 not out.
The right-hander also scored a hundred and took two wickets in a man-of-the-match performance in the last qualifying game to get England into the finals at the expense of New Zealand.
He batted superbly under pressure here and his brilliant fielding enabled England to rein in the Australians after the home side made a flying start and looked set to score in excess of 300.
Collingwood took a superb catch to dismiss dangerman Ricky Ponting and end his 138-run stand with Matthew Hayden before claiming two run outs with brilliant direct hits.
The 30-year-old then came in with his side in deep trouble at 15 for three in the chase and set them on the path to victory with a 133-run partnership with Ian Bell (65).
Collingwood, who also teamed with interim captain Andrew Flintoff (35) for a crucial 74-run stand, worked the ball into the gaps perfectly.
With tension rising in the dying overs, Collingwood showed he was capable of the big shots as he hit several boundaries to ease the pressure, fittingly hitting the winning run.
While England celebrated a third successive win, Australian veteran Glenn McGrath had a horror 37th birthday.
Had he held on to a sitter off Nathan Bracken when Bell was 18 England would have been 33 for four.
He finished wicketless, was hit in the head by a ball thrown from the outfield, was smashed back over his head by Collingwood for six, and was also involved in a botched run out attempt when Flintoff had just come to the crease.
His woes summed up Australia's night, with some crucial chances going down and the English batsmen benefiting from several near misses.
Lee was the only Australian bowler to impress, with 3-41 from his 10 overs.
Collingwood's fielding, combined with some fine bowling from Flintoff and spinner Monty Panesar, turned the match on its head during the Australian innings.
At 170-1 in the 31st over on a perfect batting wicket, with Ponting and Hayden both in top form and having added 138, Australia looked to have set the perfect foundation for a late onslaught.
However, Collingwood's superb diving one-handed catch to remove Ponting for 75 was the catalyst for an unexpected collapse by the home side.
Hayden, who made 82 from 102 balls and showed his best form of the tri-series, fell soon after to part-time spinner James Dalrymple, caught on the long-on boundary by Sajid Mahood.
The home side were 180 for three and the innings subsequently unravelled spectacularly, the home side losing their last six wickets for 23 runs in just 37 balls.
The last four wickets added just four runs.
Collingwood ran out Michael Clarke (33) by centimetres with a direct hit from mid-off.
The Englishman also ran out Brett Lee for a duck with another direct hit, this time from gully.
The lion-hearted Flintoff bowled impressively to claim the wickets of Mike Hussey, Brad Hogg and McGrath in finishing with 3-41 from 9.3 overs.
Panesar (2-44) chimed in with the crucial wickets of Ponting and Brad Hodge.
Panesar did botch what should have been a simple run out of Hayden when the left-hander was 75 and Mahmood dropped a sitter off Hussey, but for once the Australians didn't punish the England errors.