Trans interactions of erythropoietin-producing human hepatocellular (Eph) receptors with their membrane-bound ephrin ligands generate higher-order clusters that can form extended signaling arrays. The functional relevance of the cluster size for repulsive signaling is not understood. We used chemical dimerizers and fluorescence anisotropy to generate and visualize specific EphB2 cluster species in living cells. We find that cell collapse responses are induced by small-sized EphB2 clusters, suggesting that extended EphB2 arrays are dispensable and that EphB2 activation follows an ON–OFF switch with EphB2 dimers being inactive and trimers and tetramers being fully functional. Moreover, the strength of the collapse response is determined by the abundance of multimers over dimers within a cluster population: the more dimers are present, the weaker the response. Finally, we show that the C-terminal modules of EphB2 have negative regulatory effects on ephrin-induced clustering. These results shed new light on the mechanism and regulation of EphB2 activation and provide a model on how Eph signaling translates into graded cellular responses.