The municipality was created in 1971 when the City of Falkenberg was amalgamated with six rural municipalities (themselves formed by the 1952 local government reform) and part of a seventh. There are 24 original entities within the area.
Today, Falkenberg holds a strong position in the food and beverage industry with companies such as Arla Foods, Carlsberg and SIA Glass having plants in the city. In the inland Gekås, a major department store, draws visitors from all over the country. Falkenberg is also a tourist city, mainly for its many beaches.
The main income for the Municipality is tourism from around Sweden, Germany, Denmark, Holland and Norway. The food industry is important. Here has Carlsberg Brewery a plant with 570 employees and Arla Foods who makes cheese has a factory with 400 employees. Other important workplaces is the Gekås shoppingcentre in Ullared which has more than 1,100 employees. The centre is a "Mecka" for low-price shoppers and the company earns more than 2 700 000 000 (340 500 000 US Dollars) kronor each year. The shoppingcentre in Wal-Mart style (almost without food)company has 3,800,000 visitors each year which makes it Sweden's most visited place.
The Right Party was the major party until 1931, when the Social Democratic Party gained that position. With the exception of the 1946 election the social democrats won a majority of the seats from 1938 until 1966. Falkenberg has remained a stronghold for the social democrats even after the municipal reform in the early 1970s. The municipality has, however, been run by the centre-right, except for 1994-1998.