After falling 28 points behind in the opening term, the Magpies went on to kick 15 goals to five and win 17.16 (118) to 12.5 (77), moving three games clear inside the top eight.
It was a nightmare match for the Blues, who lost key forward Jarrad Waite to a knee injury in the first term and nursed Eddie Betts (hip) and Mitch Robinson (shoulder) to the final siren.
The loss of Waite was a clear turning point, with Collingwood taking the opportunity to send defender Ben Reid forward in a move that changed the game.
Reid kicked four goals, while power forward Travis Cloke finished with five goals in a dominant performance that sent him to equal top of the Coleman Medal leaderboard with 41 goals for the season.
The Magpies were unstoppable in attack, but they set up the big win by returning to the high-pressure football they were once known for, out-tackling the Blues 74-60.
Dane Swan was given plenty of latitude and finished with 41 possessions to win the Richard Pratt Medal for best on ground, while Scott Pendlebury, who played on after an early knock to his ribs, had 33 and seven clearances.
Click here to vote for the three best Collingwood players from the game in the Magpie Army Player of the Year Award.
In the final three quarters the Magpies had 24 more forward entries than their opponents, making a significant statement on the big stage after their top-eight credentials had been questioned through the week.
Collingwood coach Nathan Buckley wanted to make the point at the end of his post-match press conference.
"Last thing: we had seven of the youngest eight players on the field tonight," he said.
"Carlton have eight top 10 draft picks, and we have four.
"Some scribes were saying during the week that they've had a better season than us.
"It's not about Carlton versus Collingwood, but I reckon it's time for a reality check to assess where we're at.
"We're doing all right."
Buckley also refused to deny reports of a rift with defender Harry O'Brien, which had dominated discussion in the lead-up to the game. O'Brien missed the match with an ankle injury.
On a season-defining night for both clubs, Carlton will be left to ponder a three-game break between itself and the Magpies and a missed opportunity to re-enter the finals race.
Waite's left leg was caught under a tackle midway through the first quarter. He left the ground immediately and was substituted out after assessment in the rooms.
With the star goalkicker off, Carlton needed its small forwards to fire, but Betts, Jeff Garlett and Chris Yarran didn't lift, finishing with four goals between them.
Arguably the biggest disappointment, however, was captain Marc Murphy, who returned from a jaw injury wearing a helmet but made little impression with 18 possessions.
Andrew Carrazzo was more influential in his return from a calf injury, finishing with 24 touches, while former skipper Chris Judd battled throughout to finish with 29.
"We got beaten all over. I'm trying to think of a good player. They beat us comprehensively right across the board," Blues coach Mick Malthouse said.
"The worry was that Collingwood took over the game and we didn't get back in the game … in any division."
It wasn't always so bleak for the Blues, who burst out of the blocks to kick 7.0 in the first quarter, building a 28-point lead at the 26-minute mark before Collingwood responded.
With Waite off the ground, Reid was sent forward in the game's decisive move, kicking two goals in the final two minutes of the first quarter to cut the margin to nine points.
The second quarter was an onslaught as the Magpies got on top in the midfield, convincingly winning the inside 50s (14-5) and kicking six goals to Carlton's one, which only came after a dropped Heath Shaw mark on the last line of defence handed Betts a gift.
Cloke dominated opponent Michael Jamison, while Swan did as his pleased, with a bemused Betts pointing at his teammates to get near the Brownlow medallist at one stage.
Carlton faces St Kilda at Etihad Stadium next weekend, while Collingwood takes on Adelaide at the MCG on Friday night.
Collingwood 5.3 11.7 15.14 17.16 (118)
Carlton 7.0 8.1 9.3 12.5 (77)
Goals - Collingwood: Cloke 5, Reid 4, Witts 2, Thomas, Pendlebury, Macaffer, Dwyer, Krakouer, Seedsman
Carlton: Garlett 2, Kreuzer 2, McLean, Casboult, Lucas, McInnes, Betts, Henderson, Cachia, Yarran
Best - Collingwood: Reid, Swan, Cloke, Pendlebury, Shaw, Ball, Thomas
Carlton: Judd, McLean, Walker, Carrazzo
Substitutes - Collingwood: Clinton Young replaced by Ben Kennedy in the fourth quarter
Carlton: Jarrad Waite replaced by Dennis Armfield in the first quarter
Official crowd: 78,224 at the MCG
