Discoidin domain receptor 1 (DDR1) is a widely expressed tyrosine kinase receptor which binds to and gets activated by collagens including collagen type 1. Little is understood about the interaction of DDR1 with collagen and its possible functional implications. Here, we elucidate the binding pattern of the DDR1 extracellular domain (ECD) to collagen type 1 and its impact on collagen fibrillogenesis. Our in vitro assays utilized DDR1-Fc fusion proteins, which contain only the ECD of DDR1. Using surface plasmon resonance, we confirmed that further oligomerization of DDR1-Fc (by means of anti-Fc antibody) greatly enhances its binding to immobilized collagen type 1. Single-molecule imaging by means of atomic force microscopy revealed that DDR1 oligomers bound at overlapping or adjacent collagen molecules and were nearly absent on isolated collagen molecules. Interaction of DDR1 oligomers with collagen was found to modulate collagen fibrillogenesis both in vitro and in cell-based assays. Collagen fibers formed in the presence of DDR1 had a larger average diameter, were more cross-linked and lacked the native banded structure. The presence of DDR1 ECD resulted in "locking" of collagen molecules in an incomplete fibrillar state both in vitro and on surfaces of cells overexpressing DDR1. Our results signify an important functional role of the DDR1 ECD, which occurs naturally in kinase-dead isoforms of DDR1 and as a shedded soluble protein. The modulation of collagen fibrillogenesis by the DDR1 ECD elucidates a novel mechanism of collagen regulation by DDR1.