In the early part of the 13th century the Danish king built a fort on the east shore of the river Ätran, which eventually would give the town its name. Halland was at that time part of Denmark. It is known that falconry was pursued in the area. However, in Hallandia antiqua et hodierna, that specified a location ("mountain") where the falconry should have taken place, and which should have given name to the town, has later been shown to be incorrect.
The area north of Ätran was from time to time Norwegian or Swedish. It was on this side that a market town developed. At around 1300 a church was built. From the 14th century until the Northern Seven Years' War (1563–1570) a second town, Ny-Falkenberg (New Falkenberg) was located close to the town. The fort was destroyed by Engelbrekt Engelbrektsson's troops in 1434. The town gained market rights at the latest in 1558.
Along with the rest of the Halland, Falkenberg was to be temporarily Swedish in accordance with the Treaty of Brömsebro (1645). The Treaty of Roskilde thirteen years later made the province permanently Swedish. For a long period it struggled to keep its privileges with regard to trade and jurisdiction from the Danish time. Also like the rest of the county, it only started to slowly industrialise in the late 19th century. In the 20th century it has gained a reputation as a seaside resort.
The town hosts several teams at national level. The football team, Falkenbergs FF, has since the late 1980s established itself in the second league (currently Superettan). The table tennis team, Falkenbergs BTK, has won ten national championships, as well as one European championship. In the early 2000s, Falkenbergs VBK developed to become one of the best volleyball teams in the country and accordingly won the national championship 2007. BK Falkarna has played ten seasons in the top bowling league.