Collagens are the most abundant proteins in the human body, important in maintenance of tissue structure and hemostasis. Here we report that collagens are high affinity ligands for the broadly expressed inhibitory leukocyte-associated immunoglobulin-like receptor-1 (LAIR-1). The interaction is dependent on the conserved Gly-Pro-Hyp collagen repeats. Antibody cross-linking of LAIR-1 is known to inhibit immune cell function in vitro. We now show that collagens are functional ligands for LAIR-1 and directly inhibit immune cell activation in vitro. Thus far, all documented ligands for immune inhibitory receptors are membrane molecules, implying a regulatory role in cell-cell interaction. Our data reveal a novel mechanism of peripheral immune regulation by inhibitory immune receptors binding to extracellular matrix collagens.