Collison was born in Orange City, Iowa and grew up in Fort Dodge and Iowa Falls. He attended Iowa Falls High School and was a McDonald's All-American in 1999.
Teaming with fellow Iowan Kirk Hinrich to form one of the best duos in college basketball, Collison helped KU reach two consecutive Final Fours (2002 and 2003). Collison finished his college career as the leading scorer in the history of the Big 12 Conference (since passed by Andre Emmett). In 2003, his Jayhawks lost to Carmelo Anthony and the Syracuse Orange in the National Championship game, 81–78. He also played for the United States national team at the 2002 FIBA World Championship.
Collison's #4 jersey was retired by the Kansas Jayhawks on November 25, 2003 during halftime of the Kansas-Michigan State game in recognition of his achievements over his four-year career (2002–03 Player of the Year, consensus first-team All-America, Big 12 Player of the Year).
Collison was selected by the Seattle SuperSonics with the 12th overall pick in the 2003 NBA draft but missed the 2003–04 season with injuries to both shoulders. He made his regular season NBA debut on November 3, 2004 against the Los Angeles Clippers, scoring three points in the 84-114 loss. He finished his rookie season of 2004–05 having played in all 82 games as he averaged 5.6 points and 4.6 rebounds in 17.0 minutes per game. He went on to play a further three seasons for Seattle before the franchise relocated to Oklahoma City and rebranding as the Thunder. Collison is the only player remaining from the Seattle SuperSonics era (Russell Westbrook was drafted by the Sonics but the team relocated before his rookie season).
In his first season with the Thunder in 2008–09, Collison was once again a solid back-up off the bench as he played 71 games with 40 starting assignments. However, despite his productive first five seasons in the league, Collison's numbers dropped over the following years as his points per game averages dropped below six in 2009–10 and below five in 2010–11. Playing more of a power forward role in the lockout shortened 2011–12 season, Collison helped the Thunder reach the 2012 NBA Finals where they faced the Miami Heat. Despite a solid game one victory, the Thunder went on to lose the series in five games.
On February 3, 2015, Collison signed a two-year, $7.5 million contract extension with the Thunder.
On July 21, 2017, Collison re-signed with the Thunder to a one-year, minimum salary deal. He has expressed intentions to retire from the NBA at the end of the 2017-18 NBA season.
After the Sonics relocated to Oklahoma City, Collison continued to make his home in Seattle.
Collison and his wife, Robbie, have a daughter named Emma. His younger brother, Michael, played college basketball for their father's alma mater, Briar Cliff University in Sioux City, Iowa.