Pearson, along with horse Gentlemen, was seeking his tenth gold medal at the Games after hitting a winning treble in Sydney, Athens and Beijing.
But he settled for silver as Joann Formosa partnered Worldwide to victory in Greenwich.
"The was the worst nerves ever of my entire life but I rode the best test I could have done," said Pearson.
“Joann made no mistakes, rode every single step and had no tension. Gentlemen broke slightly into a jog in the walk and that may have lost me the medal.
“I’m actually over the moon to medal. Obviously it would have been amazing and a dream come true to have won a gold but it does not mean I’m not pleased with silver.
“With horses you can easily not medal. I know the media like the story of the numbers game – what could be – but to come to a Paralympics when things get a bit tough, I am genuinely pleased. I will be as proud of this as my gold medals on the wall.”
However, Natasha Baker claimed Britain’s first equestrian gold when she produced a record-breaking ride on her horse Cabral.
The 22-year-old crowned her Games debut with a Paralympic record for her grade II class, beating Germans Britta Napel and Angelika Trabert, who took silver and bronze respectively.
It is Baker’s second international title after she won the European gold last year on the same horse and marks the end of a 12-year quest by the Londoner who was inspired to take up riding after watching the Sydney Paralympics on television
“It means absolutely everything,” she said.
“From the age of ten I said I’d come to a Paralympic Games and win a gold medal, and to come to my first Games and win a gold medal, I just never expected that in a million years.
“It is the most amazing feeling ever. My heart was going at a thousand beats a minute. I screamed ‘Wow', and kept screaming ‘Wow'. I couldn't have asked for any better."