The name comes from Old English aeppel-by, meaning farm or settlement with apple trees. The town sits in a loop of the River Eden, sheltered by surrounding fells, with a single broad street called Boroughgate running uphill from St Lawrence's Church to the privately owned Appleby Castle at the top. The castle was founded by Ranulf le Meschin in the early 12th century, the borough followed by royal charter in 1179, and the Moot Hall, the small civic building still standing in the middle of Boroughgate, went up around 1596. Surviving roof timbers were felled between 1571 and 1596, dating it precisely. During the Second English Civil War the town was placed under siege, and the regicide Major General Thomas Harrison, later one of the men who signed Charles I's death warrant, was wounded here.

Appleby owes much of its surviving character to Lady Anne Clifford, 14th Baroness de Clifford, who lived from 1590 to 1676. She fought decades of legal battles to inherit her father's Northern estates, and once she succeeded she spent the rest of her long life restoring castles and churches across Westmorland and Cumberland, riding between them like a medieval baron. She refurbished St Lawrence's Church in Boroughgate, restored Appleby Castle as her residence, and is buried inside the church beside her mother, both their memorials still visible. The town she shaped survives in the broad gracious sweep of Boroughgate with the church at one end and the castle at the other. Appleby Grammar School, founded on two chantry bequests in 1286 and re-chartered by Elizabeth I in 1574, still operates as Appleby Grammar.

For centuries Appleby returned two MPs to Parliament despite being tiny, a classic pocket borough whose seats were effectively in the gift of the Lowther family at Lowther Hall. The roster of Appleby MPs reads like a roll call of British political history. William Pitt the Younger was member for Appleby in 1783 when he became Prime Minister at age 24, though he soon transferred to a Cambridge University seat. Later Viscount Howick sat for Appleby before becoming, as Earl Grey, the Prime Minister who passed the Great Reform Act of 1832. The Reform Act abolished Appleby's two seats, a sharp irony given that one of its former members had pushed the bill through. As the only county town disenfranchised by the Act, Appleby was controversial. The opposition tried in vain to save it at least one MP. The town never quite forgave the loss, and in 1885 it gained a new charter as compensation.

Modern Appleby has a population of just over 3,000 and an economy built on tourism, small businesses and the service sector. Butchers, grocers, bakers and newsagents still operate as independent shops. Appleby Creamery makes hand-made cheeses including an Eden Valley Brie. The town sits on the Settle-Carlisle railway, opened by the Midland Railway in 1876, with a generally two-hourly service in each direction calling at one of the most scenic stations in England. Stagecoach Cumbria runs the 563 bus to Penrith. The Appleby Agricultural Society has put on its annual show since 1841. Helen Skelton, the television presenter, attended Appleby Grammar. Saint John Boste, one of the Forty Martyrs of England and Wales, attended the same school in the 16th century before his execution in 1594. The town's history runs deep, but it is not a museum. People live here, walk to the shops, drive their children to school past the Norman castle, and once a year, in early June, they share their streets with one of Europe's largest gatherings of Romani and Traveller people for the Appleby Horse Fair.