On 31 October 2006, Collins was appointed as manager of Hibernian. Collins led Hibernian to their first national trophy in over 15 years, when they defeated Kilmarnock 5–1 in the 2007 Scottish League Cup Final. Despite the League Cup victory, Collins had a major dispute with his players just weeks later. A delegation of players met chairman Rod Petrie, where they complained about his training methods and match tactics. The players soon backed down and captain Rob Jones offered a public apology to Collins on their behalf.