The table tennis star, 31, was forced to pull out of the current series following a miscalculated jump during rehearsals on Saturday.
During a behind-the-scenes video which aired in the most recent live show, Bayley explained he initially worried he had broken his leg due to the severe pain.
Now the Paralympian, who won a gold medal at the Rio 2016 Paralympics, says he would be “devastated” if he had to miss the games next year.
He told the Sun: “I knew I had felt my knee pop and I was in agony. I’m not going to lie, the second I landed and felt it I thought ‘Tokyo’ but thought I’d get some physio, rest it for a day, and be back dancing next week.”
He added: “If I have to miss Tokyo it would be devastating. I’m at the top of my career. I’ve played four major tournaments this season and I’ve won three gold medals. I’m the best player in the world at the moment. So this is just massively scary to have this injury at this moment. It’s only just starting to sink in.”
Bayley said he may need surgery if his knee does not repair itself in the next six weeks.
His final dance with partner Janette Manrara saw the duo take on a contemporary number to Lukas Graham’s song Seven Years.
Ahead of the performance, Bayley discussed his childhood battle with non-Hodgkins Lymphoma, a cancer of the lymphatic system, and his arthrogryposis diagnosis – a condition which affects all four of his limbs.
The emotional dance, which was dedicated to doctors and patients at Great Ormond Street Hospital in London, won praise from viewers and moved judge Motsi Mabuse to tears.
The pair were awarded 32 points by the judges.