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Collagen, the most abundant extracellular matrix (ECM) protein, has emerged as a cornerstone biomaterial in drug delivery and regenerative medicine due to its intrinsic biocompatibility, biodegradability, and low immunogenicity. Engineering collagen into microspheres transforms its functionality beyond bulk scaffolds by increasing surface area, enabling minimally invasive delivery, and providing precise control over degradation, mechanical properties, and therapeutic release. This review provides a comprehensive analysis of collagen-based microspheres, with a particular focus on their dual role as biomimetic microenvironments and delivery systems. Recent advances in fabrication strategies, including emulsification, microfluidics, spray-drying, and electrospraying, are discussed in the context of scalability, size control, and payload encapsulation. Composite approaches that incorporate bioactive minerals, polysaccharides, or synthetic polymers are highlighted for their ability to enhance mechanical performance and biological function. We further examine characterization frameworks that link microscale structure and physicochemical properties to biological outcomes, with emphasis on how collagen microspheres replicate key structural, mechanical, and signaling features of native tissue microenvironments. Collagen microspheres have demonstrated broad utility as controlled delivery platforms, cell-instructive microcarriers, and injectable systems for tissue regeneration, including applications in bone, cartilage, skin, and nerve repair, as well as advanced wound care and localized cancer therapy. Finally, we critically assess current challenges related to scalable manufacturing, sterilization compatibility, and batch reproducibility, and outline emerging solutions such as recombinant collagen, advanced biofabrication, and stimuli-responsive systems. Collectively, collagen microspheres represent a powerful and adaptable platform poised to advance next-generation regenerative and therapeutic technologies.