The five-piece, currently starring in Sky Living reality TV show Steps: The Reunion, split up in 2001.
US band Evanescence went in at four with their eponymous album while last week's number one, James Morrison's The Awakening, dropped to five.
Rihanna's We Found Love remained the number one single.
Maroon 5's Moves Like Jagger stayed at number two while there was a new entry at three for Gym Class Heroes - featuring Maroon 5's singer Adam Levine - with Stereo Hearts.
Current X Factor champion Matt Cardle's Run For Your Life, as performed on the show last weekend, was a new entry at number six.
See the UK Top 40 singles chart
See the UK Top 40 albums chart
BBC Radio 1's Official Chart Show
And R&B producer Timbaland, featuring rapper Pitbull, scraped into the singles chart with Pass At Me - a new entry at number 40.
The Ultimate Collection has become a third UK number one album for Steps, whose hits include 5, 6, 7, 8, One for Sorrow and Love's Got a Hold on My Heart.
Elsewhere in the album chart, singer-songwriter Ed Sheeran climbed three places back up the chart to number two, with +, while Adele's 21 dropped a place to three.
There were also new entries for Katherine Jenkins' Daydream, at six, Jason Derulo's Future History, at seven, and US singer-songwriter Ryan Adams' Ashes & Fire, at nine.
Cliff Richard's duets album Soulicious went in at 10 while Johnny Mathis' The Ultimate Collection went in at 17.
Other new entries in the chart included Bjork's Biophilia, at 21, Peter Gabriel's New Blood, at 22, and Voices of the Valley - The Ultimate by Fron Male Voice Choir, at 33.
Radiohead remix album TKOL RMX 1234567 was a new entry at number 34.
Reunited pop group Steps are number one in this week's UK album chart with their greatest hits package The Ultimate Collection.