We report on the observation of the confinement-induced collapse dynamics of a dipolar Bose-Einstein condensate (dBEC) in a one-dimensional optical lattice. We show that for a fixed interaction strength the collapse can be initiated in-trap by lowering the lattice depth below a critical value. Moreover, a stable dBEC in the lattice may become unstable during the time-of-flight dynamics upon release, due to the combined effect of the anisotropy of the dipolar interactions and inter-site coherence in the lattice.