Phil Collins recorded a new version of "A Groovy Kind of Love" in 1988. He had originally suggested the song as a good one for collaborator Stephen Bishop to record, with Collins producing. While filming the movie Buster (1988), Collins suggested the song as a potential love theme for the title character and his wife. He recorded a demo as a guide for the producers, only to find out later his demo had actually been used in the film. Collins had initially expressed reservations about being featured on the soundtrack during the movie, but relented due to feeling it worked well for the scene. He subsequently recorded a full version of the song, co-produced by Anne Dudley. This version was originally released on Buster: The Original Motion Picture Soundtrack. It subsequently appeared on the compilation albums Hits, Love Songs: A Compilation... Old and New, and The Singles. A live performance appeared on his Serious Hits... Live! album.

Unlike the Mindbenders' version, which was an upbeat guitar-based pop song, Collins' was a slow ballad with a prominent keyboard and strings. When released as a single, it reached No. 1 on both the U.S. and UK charts, becoming Collins' only single to top the charts in both countries; it was his last No. 1 single in the UK. The single was certified silver in the UK by the British Phonographic Industry. It also reached No. 1 on the U.S. Adult Contemporary chart. The song earned Collins a Grammy Award nomination for Best Pop Vocal Performance, Male in 1989.