It is found in the eastern United States, where it fruits singly, in groups, or clusters on the ground in deciduous and mixed forests.

The fungus was described as new to science in 1963 by mycologists Lexemuel Ray Hesler and Alexander H. Smith in their monograph on North American species of Hygrophorus.

[2] Hesler collected the type on July 28, 1958 in Cades Cove, Great Smoky Mountains National Park (Tennessee).

Velosae Because of its color and habit, Hesler and Smith originally thought the unknown agaric was H. coccinea or perhaps a large form of H. miniata, but study of its microscopic characteristics revealed that it was distinct from these.

They noted that the fibrillose-squamulose texture of the cap (i.e. that it appears to be made of thin fibers, or covered with small scales) and the large spores suggested a relationship with H. turundus.

The immature macrobasidia were described as pleurocystidia (i.e., cystidia arising from the side, or face, of the gill),[8] which Hesler and Smith described as "more or less embedded in the hymenium".

[8] Deborah Jean Lodge and colleagues, in a reorganization of the family Hygrophoraceae based on molecular phylogenetics, proposed that H. appalachianensis should be the type species of the new section Pseudofirmae in genus Hygrocybe.

[10] Species in this section, which include Hygrocybe chloochlora, H. rosea, and H. trinitensis, have sticky or glutinous caps that often have perforations in the center.

Hygrocybe cantharellus is a bright red mushroom that has smaller fruit bodies and a more slender stipe than H. appalachianensis.

[13] Hygrocybe reidii, found in Europe and northeastern North America, has flesh with a sweet odor that is reminiscent of honey.

[14] Widespread and common in the Northern Hemisphere, the scarlet waxcap (Hygrocybe coccinea) is most reliably distinguished from H. appalachianensis by its smaller spores, measuring 7–11 by 4–5 μm.

Like all Hygrocybe species, the fungus is believed to be saprophytic, meaning it obtains nutrients by breaking down organic matter.