Peek was expected to be put on injured reserve Thursday.
Peek was running down the field in practice, planted and tore his right patellar tendon. Crennel said Peek had surgery to repair the tendon Thursday.
"He had the feeling that it was something major," Crennel said of Peek. "He was disappointed."
To replace Peek, Cleveland signed linebacker Shantee Orr, who was cut by the Browns last week. Orr already knows the defense after spending the entire summer with the team.
The Browns open the 2008 season with a high-profile matchup this week against the Dallas Cowboys.
"In this business guys get hurt," Crennel said Thursday. "But guys understand we have to move forward because we have a game to play on Sunday."
Because of the loss of Peek, rookie Alex Hall, a seventh-round draft pick from Saint Augustine's (N.C.), will get more playing time than he expected.
"In preseason, he showed poise for a young guy," third-year linebacker Kamerion Wimbley noted. "I think he has the ability to play in the NFL or else we wouldn't have kept him. He definitely showed some signs of being a good player."
Peek's loss is significant since he was being counted on to improve the Browns' weak pass rush. Cleveland recorded just 28 sacks last season, tied for 26th overall in the league.
Peek, 28, had just returned to practice this week after undergoing arthroscopic surgery on July 31.
"It's tough to replace a guy like him," said center Hank Fraley, a team captain. "On and off the field he's a great guy. In the locker room, he's always helping others and he's working with the offensive tackles all the time on the pass rush. It's hard to see a guy like that who has trained so hard to get back on the field. To lose him that way so early in the season, it hurts.
"Everybody pretty much stopped when we heard it was Peek. It's just sad. He's such a great worker. It's tough to lose his leadership, too."
James Walker covers the NFL for ESPN.com. Information from The Associated Press was used in this report.