The world No.2 came from a set down on Tuesday (AEST) to defeat the red-hot American 4-6 6-4 6-3, a victory which moved Sabalenka into her first WTA 1000 quarter-final of the season.
The Belarusian is aiming to become the first three-time champion since Petra Kvitova, having won the title in 2021 and 2023.
Buoyed by back-to-back titles in Miami and Charleston, 13th-seeded Collins came into her fifth meeting against Sabalenka looking for her first win. All four of Sabalenka's previous victories came on hard courts, including three at the US Open.
But after yet another high-quality contest between the pair which yielded a combined 69 winners, Sabalenka prevailed once more after two hours 24 minutes.
In a rematch of last year's fourth-round duel, Sabalenka will face Mirra Andreeva in the next round after the Russian celebrated her 17th birthday with a 7-6 (7-2) 6-4 win over 12th-seeded Jasmine Paolini.
Earlier in the day, top-ranked Iga Swiatek remained on track for a first Madrid title by dispatching Sara Sorribes Tormo 6-1 6-0.
Swiatek dropped just five points in the second set en route to the quarters of the only major European clay tournament the Pole has yet to win.
Iga Swiatek returns serve during her rout of Sara Sorribes Tormo. (AP PHOTO)
The 27th-ranked Sorribes Tormo was the last Spanish woman in the draw.
Swiatek, who lost last year's Madrid decider to Sabalenka, will next face 11th-seeded Beatriz Haddad Maia, who defeated fifth-seeded Greek Maria Sakkari 6-4 6-4.
Third seed Madison Keys rallied after trailing in the first and second sets to defeat Coco Gauff 7-6 (7-4) 4-6 6-4 in an all-American fourth-round meeting.
It will be the 20th-ranked Keys' first last-eight appearance in Madrid. She lost in the first round in seven of her nine previous trips to the Spanish capital.
Keys will face eighth-seeded Ons Jabeur, who eased past Jelena Ostapenko 6-0 6-4, while fourth seed Elena Rybakina defeated teenage qualifier Sara Bejlek 6-1 6-3.
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