The collagen receptor DDR1 is a receptor tyrosine kinase that promotes progression ofa wide range of human disorders. Little is known about how ligand binding triggers DDR1 kinase activity. We previously reported that collagen induces DDR1 activation through lateral dimer association and phosphorylation between dimers, a process that requires specific transmembrane association. Here we demonstrate ligand-induced DDR1 clustering by widefield and super-resolution imaging and provide evidence for a mechanism whereby DDR1 kinase activity is determined by its molecular density. Ligand binding resulted in initial DDR1 reorganisation into morphologically distinct clusters with unphosphorylated DDR1. Further compaction over time led to clusters with highly aggregated and phosphorylated DDR1. Ligand-induced DDR1 clustering was abolished by transmembrane mutations but did not require kinase activity. Our results significantly advance our understanding of the molecular events underpinning ligand-induced DDR1 kinase activity and provide an explanation for the unusually slow DDR1 activation kinetics.