The mechanical interplay between cells and their extracellular matrix (ECM) presents a fundamental paradox in mechanobiology: while individual cells respond monotonically to increasing mechanical stimulus, collective cellular behaviors exhibit sharp transitions at critical cell densities. This is particularly evident in tissue condensation, where cell-seeded collagen matrices either dramatically contract or remain unchanged depending on whether the initial cell spacing falls below or above a critical threshold. Here we resolve this apparent contradiction through bio-chemo-mechanical modeling of cell-ECM interactions. We show that while increasing ECM stiffness enhances individual cell activation, it simultaneously weakens the mechanical cross-talk between cells, creating a non-monotonic relationship that governs collective behavior. This competition between local activation and neighbor communication establishes a critical spacing threshold below which cells can mechanically polarize their neighbors through ECM remodeling. The predicted critical spacing aligns with experimental observations of the cell density required for tissue condensation, reconciling single-cell and collective responses. Our model reveals how recursive interactions between cellular contractility and ECM mechanics give rise to emergent spatial ordering, demonstrating how complex multicellular behaviors can emerge from simple mechanical principles. These findings provide a physical basis for understanding mechanobiological signaling, with implications for tissue development and disease progression.