Joe Ousalice, now 68, said he was "hounded out" of the navy and made to feel "disgusting" for being bisexual, after serving for almost 18 years.
The British armed forces banned LGBT service members until 2000, when the European Court of Human Rights ruled that it was unlawful.
Ousalice, a former lead radio operator, served in the Falklands War, carried out six tours of Northern Ireland and traveled with the navy to Hong Kong and Egypt. He was awarded a long-service medal and good conduct badges.
"The navy wasn't just my job, it was my life," he said in a statement. "But to do it I had to hide another important part of me, which I did because I loved the navy life so much I didn't want to give it up. But I shouldn't have been asked to choose."
Ousalice concealed his sexuality from others in the navy but feared he was under surveillance by its Special Investigation Branch.
Emma Norton, head of legal casework at the human rights organization Liberty, which is representing Ousalice, told CNN: "At the time, the Ministry of Defence were actively seeking out LGBT people and submitting them to surveillance and hounding them out."
"Liberty has been contacted by a lot of LGBT people who would describe things like their (mail) being opened, their friends and family being questioned, being followed around town when on leave, being followed into pubs. They had to live a secret life," Norton said.
While on shore leave in 1992, Ousalice was charged with and convicted of indecency in a civilian court, a charge he denies. Later, the navy accused him of indecent assault. Although he was subsequently cleared at a court martial hearing, he was convicted of "conduct prejudicial to good order and naval discipline" and compelled to state publicly that he was bisexual.
Ousalice was dismissed from the navy and his medal and badges were cut from his chest directly after the trial.
"I was made to feel like I was disgusting and in the end I was hounded out on some trumped-up charges, and told that because I was attracted to men, my 18 years of service counted for nothing," he said in a statement. "It was heartbreaking. It took me years to recover."
CNN has contacted the Ministry of Defence for comment.
Norton told CNN that Liberty has informed the ministry of its intention to sue if Ousalice's medal and badges are not returned. His case, she said, is "a consequence of the decades of discrimination that lots of LGBT people suffered at the hands of the MoD."
"So many LGBT people were affected by this policy," she added. If the medal and badges are returned, she said, "it will send a very strong message to LGBT people that their work is valued and what they gave the forces is valued."
Ousalice said now he just wants his "medal and badges back, and recognition from the government and the Royal Navy for all the years of service and hard work I gave them."
"And I also want other LGBT veterans to know they're not alone, and that we all deserve the same recognition," he said.
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