The 20-year-old, the youngest member of Great Britain's cycling team, seemed set to win Paralympic gold on his Games debut, leading Slovakia's Jozef Metelka by a wide margin and looking to add to his world championship title.
However, with just 500 meters remaining, Atkinson began to show signs of fatigue. He lost his balance on a corner and fell off his bike. The impact caused the bike to hit the back of his head as he fell at high speed.
He had to be assisted off the track in front of a shocked crowd at the Paris velodrome. BBC Sport has been informed that while Atkinson will be evaluated by the British Cycling medical team, he has not sustained any serious injuries.
"I think I'm okay," Atkinson told Channel 4. "I can see and I'm all in one piece, so I'm happy. I've never pushed myself that hard before, and it showed. I just ran out of energy and went down."
The day before, Atkinson had competed in the men’s C4-5 1,000m time trial, finishing in fifth place.
Earlier on Saturday, the Cheshire rider had delivered an exceptional performance in qualifying, shattering the world record with a time of 4:17.700—five seconds faster than the previous record.
He had beaten Metelka in the qualifier, but in the final, it was the Slovakian who secured the gold by maintaining his position and riding past the fallen Atkinson in the final moments.
Atkinson was awarded silver for reaching the final, despite not finishing the race, and he was well enough to collect his medal on the podium and wave to the cheering crowd.
"It's been amazing," he said. "It feels a bit unreal. I’m very proud and happy. A Paralympic record and a silver medal—I wouldn’t have believed it in my wildest dreams."
Gatien le Rousseau won bronze for France, defeating compatriot Kevin le Cunff.