The incident happened on Wednesday at around 8.15pm near the Belfry Country Inn.
The Fire Services attended the scene, freeing a woman who was trapped in one of the cars.
Five people were transferred by ambulance to Altnagelvin Hospital with what police described as "serious injuries." A young female is in a stable condition, the Western Trust confirmed.
The road re-opened a short time later and all diversions were lifted.
There are no further details.