The Ca3Ru2O7 with a Mott-like transition at 48 K and a Neel temperature at 56 K features different in-plane anisotropies of magnetization and magnetoresistance. Applying the magnetic field along the magnetic easy axis precipitates a spin-polarized state via a first-order metamagnetic transition but does not lead to full suppression of the Mott state, whereas applying a magnetic field along the magnetic hard axis does, causing a resistivity reduction of three orders of magnitude. The colossal magnetoresistivity is attributed to the collapse of a novel, orbitally ordered and spin-polarized state. This new phenomenon is striking in that the spin polarization, which is a fundamental driving force for all other magnetoresistive systems, is detrimental to the colossal magnetoresistance (CMR) in this 4d-based electron system. Evidence for a density wave is also presented.