The AFL's feel-good story of the season will roll on to a semi-final next Friday night against Geelong after the Power upset the Magpies 12.15 (87) to 9.9 (63).
In a pulsating match, Collingwood threatened to kick clear of Port several times, only for the Power to answer every challenge.
After the Magpies hit the lead at the start of the final term, Port absorbed the pressure again and fired back with the last five goals of the game.
The loss ends a frustrating season for the Magpies, who constantly battled injuries and were never able to gain consistent form.
Power utility Brad Ebert was awesome with 23 possessions, while young star Chad Wingard kicked three goals.
Domenic Cassisi performed a crucial tagging role on Magpies playmaker Scott Pendlebury and Tom Logan and Alipate Carlile were resolute in defence.
This is Port's first finals series since their record grand final loss in 2007.
They finished 14th last season and had become a basket case on and off the field.
But president David Koch and coach Ken Hinkley have led an amazing turnaround.
After Collingwood hit the front early in the final term, Port missed three set shots.
The Power kept pressing and a superb tap from ruckman Matthew Lobbe set up captain Travis Boak for a goal at 16 minutes.
The Power had regained the lead and this time Collingwood could not respond.
Collingwood trailled at every change and every time they surged, they were never quite able to shake off their gutsy opposition.
Trailling by 12 points at halftime, Collingwood jumped Port at the start of the third term with three goals in 10 minutes.
But the Power worked furiously to keep the game tight.
A smart kick out of a pack by Ebert sent Port forward and Wingard kicked a booming 50m goal against the run of play at 17 minutes.
Another long goal from Ollie Wines helped put the Power back in front at three-quarter time.
The first half was full of drama, as Port broke to a 24-point lead early in the second term.
There was plenty of niggle between Port forward Angus Monfries and his opponent Heath Shaw, who threw the ball into the face of the Port forward at the half-time siren.
The second term opened brilliantly for Port, with captain Travis Boak goalling on the run.
Then Shaw clashed with Monfries and gave away a silly free kick before the next centre bounce.
Collingwood ruckman Quinten Lynch (ankle) was a late withdrawal, with Jamie Elliott taking his place.
Wingard made it clear post-match that the Power were unhappy with comments from Magpies president Eddie McGuire in the leadup.
McGuire had said last Sunday that Collingwood were unimpressed about the possibility of a six-day break between this match and a semi-final.
"It was a pretty big kick in the guts, them thinking onwards to next week," Wingard told Triple M.
Port coach Ken Hinkley said he had enormous belief that his team would rise to the occasion.
"They had a really strong week at training (and) they weren't worried about the fact it was an elimination final," Hinkley said.
"That wasn't in their minds, I don't reckon - it was more about an opportunity.
"As has been the case all year, we've been able to step up ... tonight was another fantastic performance."
He praised the outstanding performances of youngsters Wines and Wingard, saying good players do well in finals.
Hinkley also said having Geelong as semi-finals opponents meant it would be easy to keep a lid on the team's mood.
"That does it, Geelong off the back of a loss," he said, referring to the Cats' upset qualifying final loss earlier on Saturday.
"We know how proud they are as a club, but we're going to come here and we're going to expect to play well."
Collingwood coach Nathan Buckley was grim-faced after the game, saying the final had exposed their weaknesses.
"Twenty-seven of our kicks were marked directly by them. That will be some sort of world record," he said.
"Our use by hand and by foot was deplorable and that's as bad as we've been all year.
"I didn't see that coming."
PORT ADELAIDE 2.4 6.6 8.9 12.15 (87)
COLLINGWOOD 1.4 4.6 7.7 9.9 (63)
Goals: Port Adelaide - Wingard, Schulz 3; Wines, Boak 2; Monfries, Westhoff. Collingwood - Swan 3; Cloke 2; Macaffer, Beams, Keefe, Williams.
Best: Port Adelaide - Ebert, Cassisi, Wingard, Logan, Carlile, Cornes. Collingwood - Swan, Beams, Williams, Sidebottom.
Umpires: Chris Donlon, Jeff Dalgleish, Scott Jeffery.
Official Crowd: 51,722 at MCG.