However, the man, believed to be in his 70s, was pronounced dead a short time later.
Dorset Police said it is thought the man may have had a "medical episode" as he was driving the car, which then led to the crash.
The coroner is now investigating what the cause of death was.
The incident happened outside the Co-Op store in Easton Square and involved a red Ford Fiesta registered to a Portland person and a blue Ford Focus registered to a man from Hampshire. The road was closed for three hours while investigations took place.
The driver of the Focus was rushed to hospital by ambulance where he later died. The road was closed from Easton Square to the Straits and police officers at the scene were redirecting traffic.
Paramedics were also called to the incident.
A police spokesman said: “A road traffic collision occurred at 6.10pm in Easton Square involving a blue Ford Focus and a red Ford Fiesta.
“Unfortunately, the male driver of the Focus, from the Southampton area, was pronounced deceased at Dorset County Hospital a short time later.
“There is a possibility that the Road Traffic Collision could have been a result of the man who died having a medical episode at the wheel.
“The coroner is now investigating this.”
Sergeant Stuart Pitman of Dorset Police Road Traffic Unit is appealing for witnesses to the collision and anyone who saw either car immediately prior to the incident to contact police as soon as possible.
A passer-by said that the emergency services were on the scene very quickly and that the casualty was taken to hospital.
She said: “I didn’t think it was too bad at first and it is absolutely tragic that someone has lost their life.”
The road was closed for three hours while crash scene investigators worked at the scene.
The spokesman added that Sergeant Pitman said he would like to thank the local community for their patience and understanding during this tragic incident.
A spokesman for the South Western Ambulance Service Trust said: “There was one casualty in the incident, an elderly man in his 70s.
“He was taken to Dorset County Hospital.”
Anyone with information is asked to contact Dorset Police on 101 quoting incident number 333 of August 25.