Falaise region was inhabited from prehistoric times but it wasn't until the end of the prehistoric period and the beginning of the Gallo-Roman era that the area, and Falaise in particular, was regularly inhabited. Evidence of settlement from this time has been found at Vaston, an agricultural area just north-east of the modern town.

The town was the birthplace of William the Conqueror, first of the Norman Kings of England. The Château de Falaise (12th-13th century), which overlooks the town from a high crag (French: falaise), was formerly the seat of the Dukes of Normandy. Also, the Treaty of Falaise was signed at the castle in December 1174 between the captive William I, King of Scots, and the Plantagenet King of England, Henry II .

The town is also the place where Rabbi Yom Tov of Falaise, grandchild of Rashi held his rabbinical court. In modern times it is known for the battle of the "Falaise Pocket" during the Allied reconquest of France (called Operation Overlord) in August 1944 in which two German armies were encircled and destroyed by the Allied armies. Some 10,000 German troops were killed and 50,000 taken prisoner.

Two-thirds of Falaise was destroyed by Allied bombing before the town was taken by a combined force of Canadian and Polish troops. Falaise was largely restored after the war.

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