The 29-year-old suffered nerve damage to his right shoulder while on England sevens duty in June, 2005 and has failed to gain full sensation in his right arm.
South Africa-born Appleford, capped by England against Argentina in 2002 while a London Irish player, underwent two operations and 20 months of rest and rehabilitation.
He said: "I am very disappointed to have to call time on my career.
"I was hoping to return to action this season, and I will always be sad that I was never able to pull on a Saints jersey in a game situation.
"I must thank Saints and the Rugby Football Union for all their support.
"Both have been outstanding during the last 18 months, and have done everything possible to try to get me back to full fitness and make my recovery as easy as possible.
"I have put my inactive time to good use by supporting the coaching and analysis department at Franklin's Gardens, and hope I can stay involved in some way on the future."
Northampton head coach Paul Grayson added: "It is a genuine disappointment that Geoff has never pulled on the black, green and gold of Northampton.
"The major reason for signing Geoff was because I hated playing against him. His size, physical presence and intelligence would have enhanced the Saints back line no end.
"As it is, his injury has proved too severe and it is sad to see him have to call it a day.
"In the meantime, Geoff has not sat back. He has, instead, created his own sports analysis system which we now use at Northampton, and it would be good to think he could stay involved with the club."
Northampton have also released former New Zealand flanker Sam Harding from their squad.
Harding, who joined the Guinness Premiership club last season, has left by mutual consent after making 32 appearances.
Grayson said: "Sam Harding is a fine rugby player, and he has performed well in his time at Saints.
"However, competition for places has meant that his involvement has been limited and this has been a source of frustration to him.
"He leaves Northampton with our best wishes for his future both in the game and beyond."