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After seeking medical advice last Friday Appleton opted to retire from the game on medical grounds.
A clearly devestated Appleton told the Baggies official site: "It's the conversation no footballer wants to have," Appleton revealed on the club's official website.
"When you suffer a serious knee injury you always know there's a slight possibility you might not make it back but it doesn’t really cross your mind. You stay positive.
"That's why the news is so devastating.
"I now need a few weeks off to try and get my head clear and work out where I'm going to go from here."
Appleton played 10 games for Town in the 1996/97 relegation season. The Manchester United rookie was brought in after the new year by Kenny Swain in a bid to bolster the midfield.
Appleton's class was clear to see from his first game, although his team-mates lacked his passion to win. His final game at Town came in the 1-1 draw with Manchester City at Blundell Park. Appleton opened the scoring after 17 minutes with a delightful curling effort.
Swain was keen to keep the Salford born player until the end of the season but could not agree a deal with the Old Trafford club.
Appleton's form with Town didn't go unnoticed, in August of that year Preston paid £500,000 for his services. Four years later and nearly a 100 league games later, West Brom splashed out £750,000.
His time time at the Hawthorns proved to be an injury ravaged one with the player making just 33 league apperances. Appleton also missed out on the Baggies season in the Premier League with his last game coming in November 2001 in the local derby with Birmingham.