Max Verstappen will start Sunday's race from pole position ahead of Ferrari's Carlos Sainz with British driver Lando Norris an impressive third for McLaren.
Hamilton lines up in fourth, despite a bizarre coming together with Russell, who qualified 12th, on the main straight at Barcelona's Circuit de Catalunya.
As both Mercedes men started their hot laps in the closing moments of Q2, Hamilton moved to his left and out of Russell's tow to assume the racing line for the first right-hander corner.
But the seven-time world champion was forced to take to the grass after Russell, pre-occupied with Sainz ahead of him, closed the door.
Hamilton kicked up dirt from the grass, while his right front-wing endplate flew off following contact with Russell.
"George just backed off," said Hamilton over the radio. "That is really dangerous. He pulled over to the left. I might have some damage on the car."
Although Hamilton's time was good enough to progress to Q3, and limp back to the pits for repairs, Russell was eliminated.
"You didn't tell me there was a car behind," said Russell. "I don't know what the hell was going on in that session. The car was bouncing. I couldn't get my tyres working."
Both Mercedes drivers were summoned to see the stewards to explain their version of events.
Russell was let off the hook with a formal warning after he was adjudged not to have checked his mirrors.
Hamilton, 38, revealed he cleared the air with Russell, 25, after he moved to draw a line under their first coming together as team-mates.
"It was just a misunderstanding," said Hamilton, who qualified fifth but moved up a place after Pierre Gasly was penalised for blocking in qualifying. "I have spoken to George. I went and shook his hand and that was it."
The Mercedes drivers were closer on track than desired after Russell aborted his previous lap.
"Lewis was not aware that I was starting a quick lap," said Russell. "I was looking ahead to get the slipstream from Sainz.
"It was not something that either driver necessarily did wrong, but within the team it shouldn't happen and the communication should have been better towards us."
Hamilton and Nico Rosberg - in the paddock on Saturday as a pundit for Sky Sports - collided on the opening lap here at the peak of their acrimonious relationship in 2016.
Mercedes team principal Toto Wolff threatened Hamilton and Rosberg with a ban if they collided again.
And the Austrian was asked if Saturday's qualifying collision between his current drivers evoked memories of that race in Spain seven years ago.
"No, it wasn't shades of 2016," he said, with a wry smile. "I wish we were in the situation of 2016 where we're so quick.
"But it shouldn't happen. Team-mates should never collide - and even with another car, you should never collide in qualifying.
"Lewis saw it as his last opportunity and didn't think that George was on that line. It looks silly, but it wasn't, it was just a miscommunication.
"This is a team effort and we need to review our communications to avoid it in the future."
With Mercedes tripping over one another, Verstappen, who finished four tenths clear of Sainz, will be favourite to convert pole into his fifth victory from seven rounds this year.
Verstappen heads Sergio Perez by 39 points in the standings, but his Red Bull team-mate starts only 11th after he fell off the road.
It was a qualifying session to forget for Charles Leclerc, too, as he could manage only 19th of the 20 runners. Home favourite Fernando Alonso lines up ninth on the grid.