The Top 14 powerhouse was stunningly knocked out in the quarter-finals of the play-offs by Lyon, losing on tries scored after extra-time finished 19-19, and were also eliminated in the last eight of the European Champions Cup.
Collazo will now take the helm, having left La Rochelle after seven years following reports of tensions with the club's hierarchy over his methods.
Galthie will remain with the club, however, volunteering to work in an unpaid role with the club's youth team.
"Galthie wanted to stay at the club for laudable reasons," Toulon president Mourad Boudjellal said. "He is disappointed, and he feels he owes the club a debt and will therefore volunteer for one year.
"It's not my idea, he's the one who suggested it to me. I would not have dared to propose that to him."
Former Argentina international Juan Martin Fernandez Lobbe will coach the defence and the line-out while France scrum-half Sebastien Tillous-Borde, who had been expected to join promoted Grenoble, will coach the backs.