Police officers are appealing for information following the collision reported at 10.23am near the Holdingham roundabout, involving an Audi A6 and Toyota Aygo.
Emergency services attended and the road was closed until around 6pm while they worked at the scene.
The female driver of the Aygo suffered serious injuries and was taken to hospital, said a police spokesman.
Sleaford fire crews used hydraulic rescue equipment to remove the roof from one of the cars and assisted ambulance staff in removing the casualty.
The driver of the Audi, a man in his 40s from the Grantham area, has been arrested.
Anyone who witnessed this incident, or who has dashcam footage, should get in touch on 101 quoting Incident 72 of November 15.