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Collina was born in Bologna and attended the local university, graduating with a degree in medicine in 1984. During his teenage years, he played as a central defender for a local team, but was persuaded in 1977 to take a referee's course, where it was discovered that he had a particular aptitude for the job. Within three years he was officiating at the highest level of regional matches, while also completing his compulsory military service.

In 1988, he progressed more rapidly than normal to the national third division, Serie C1 and Serie C2. After three seasons, he was promoted to officiating Serie B and Serie A matches. About this time he contracted a severe form of alopecia, resulting in the permanent loss of all his facial hair, giving him his distinctive bald appearance and earning the nickname Kojak.

In 1995, after he had officiated at 43 Serie A matches, he was placed on FIFA's Referees List. He was allocated five matches at the 1996 Olympic Games, including the final between Nigeria and Argentina. He refereed the 1999 UEFA Champions League Final between Bayern Munich and Manchester United; he cited this as his most memorable game because of the cheers at the end, which he described as 'lions' roar'.

In 2002, he reached the pinnacle of his career when he was chosen for the World Cup final between Brazil and Germany. Prior to the game, Oliver Kahn told the Irish Times: "Collina is a world-class referee, there's no doubt about that, but he doesn't bring luck, does he?" He was referring to two previous high-profile matches that Collina had refereed which involved Kahn: the aforementioned UEFA Champions League final in 1999, a 2-1 defeat for Bayern; and Germany's 5-1 defeat against England in 2001. Kahn's luck did not change in the final. He was referee for the 2004 UEFA Cup final between Valencia and Olympique Marseille.

Euro 2004 was his last major international tournament, as he reached the mandatory retirement age of 45 for FIFA referees early in 2005. His last international match was Portugal - Slovakia, for a 2006 FIFA World...Cup qualifier at Estádio da Luz in Lisbon. The Italian Football Federation raised its mandatory retirement age to 46 in order to accommodate Collina for a further season. However, a dispute emerged between the federation and Collina early in August 2005, following Collina's decision to sign a major sponsorship deal with Opel (also advertising for Vauxhall Motors in Great Britain - both are owned by General Motors). As Opel was also a sponsor of Serie A club A.C. Milan, the deal was seen as a major conflict of interest and Collina was disbarred from refereeing top-flight matches in Italy. In response, Collina handed in his resignation, effectively ending his career. The Italian Referees Association then attempted to reject his resignation, but he persisted with his retirement.

Perhaps one of the greatest distinctions of Collina's career was earning the hatred of Luciano Moggi, the Juventus official and chief instigator of the 2006 Serie A scandal. Collina was one of the referees that Moggi attempted to have punished for decisions that Collina made against Juventus. Although Collina is closely identified with football, his favourite sports club plays basketball. He is a lifelong supporter of Fortitudo Bologna, one of Europe's leading basketball clubs.