The 75-year-old actress, who has played Colleen Smart on-and-off since 1988, admitted that age played an important factor in her decision.
"I'd been there for a long time and there are a few other things I'm interested in doing," she told TV Week. "I'm researching New Theatre, which I've been involved with for 30-something years, and this frees my time up.
"You get to a certain age and you don't know how much longer you'll be around, quite frankly, and my memory is still quite good - I don't know how long that's going to last!"
Collingwood also revealed she will miss co-stars Ada Nicodemou (Leah) and Lynne McGranger (Irene) most.
Recalling her favourite moments as Colleen, the star added: "Years ago, some conman sold her a piece of land in Queensland and it was just a bog, and I enjoyed her being taken for a ride.
"Also, when she was a poker machine addict, but that only lasted for about five minutes. I liked the plane crash, and the abduction and being shaken up in the van - that was fun."
Collingwood hopes to distance herself from her gossipy, "politically incorrect" alter ego, adding: "Some people think you're like your character."