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Collingwood was incorporated as a town in 1858, nine years before Confederation, and was named after Admiral Cuthbert Collingwood, Lord Nelson’s second in command at the Battle of Trafalgar, who assumed command of the British fleet after Nelson’s death.

The area had several other names associated with it, including Hurontario (because it lies at the end of Hurontario Street, which runs from Lake Huron — of which Georgian Bay is a part — south to Lake Ontario), Nottawa, and Hens-and-Chickens Harbour (because of one large and four small islands in the bay).

In 1855, the Ontario, Simcoe & Huron (later called the Northern) Railway came into Collingwood, and the harbour became the shipment point for goods destined for the upper Great Lakes ports of Chicago and Port Arthur-Fort William (now Thunder Bay). Grain was one of the primary products by tonnage shipped, and a large grain elevator; Collingwood Terminals Limited; was built on the waterfront for transshipment of grain from trains and later trucks to lake freighters in 1929, and operated for 64 years until 1993. It still stands today.

Shipping produced a need for ship repairs and so it was not long before an organized shipbuilding business was created. On May 24, 1883, the Collingwood Shipyards, formally known as Collingwood Dry Dock Shipbuilding and Foundry Company Limited, opened with a special ceremony. On September 12, 1901, the Huronic, the first steel-hulled ship in Canada, was launched in Collingwood. The shipyards produced lake freighters and during World War II contributed to the production of corvettes for the Royal Canadian Navy. Shipbuilding was one of the principal industries in the town, employing as much as 10% of the total labour force. However, overseas competition and overcapacity in shipbuilding in Canada led to the demise of shipbuilding in Collingwood in September 1986.

The creation of government incentive programs and a fully-serviced industrial park made it possible for Collingwood to attract eleven new manufacturing firms to the town by 1971. Eight additional manufacturing companies had located in the town by 1983, which made Collingwood the largest industrial employer in the region.

Collingwood’s industrial base, which includes Pilkington Glass of Canada, Goodall Rubber Company – Canada ULC, and VOAC Inc, and which are among the community’s largest employers, has begun to erode.

Several industries in the area have closed, including Collingwood Ethanol L.P., Nacan Products (2004), Backyard Products (2004), Kaufman of Collingwood (2006 – land still vacant),[3] Goodyear Tires (2007 – plant built in 1967 was demolished after 2019 and now vacant), Alcoa Wheel products (2008 – building now home to Barber Glass plant[5]) and the Blue Mountain Pottery (2004). Collingwood is also home to the distillery where Canadian Mist Whisky is produced.

In June 2007, Collingwood Ethanol (now Amaizeingly Green) began production in the former Nacan facility. The company expected to produce 50 million litres of ethanol annually to satisfy regulatory requirements on ethanol content in gasoline mandated by the provincial and federal governments. Collingwood Ethanol also produces byproducts of the ethanol manufacturing process, including an organic corn gluten fertilizer. Petitions have been submitted to the town by residents of a new housing development located across the road in an effort to force Collingwood Ethanol to reduce the amount of odour and noise that they are causing during the times when they are in full production. Before Collingwood Ethanol started production, however, Nacan (a starch plant that once occupied the now ethanol plant) also created a strong odour and noise. This made many locals wonder why a housing development would be built across the road from an industrial part of town. In December 2012, Amaizeingly Green filed for receivership of the plant. Due to the higher cost of corn, the plant has since been closed. Demolition of the plant started December 2018.

Located on the southern shores of Georgian Bay and close to Blue Mountain, a promontory of the Niagara Escarpment, the town is a major recreation area for the southern part of the province. Blue Mountain itself is noted for skiing, and also for its Scenic Caves. The town is also a short distance from Wasaga Beach Provincial Park, a destination that received the title of Biosphere Reserve in 2004.