The first half own goal by Craig Ireland was added to by a Peter Lovenkrands penalty early in the second half. Rangers looked comfortable at this stage, but two goals in the few minutes spell as Falkirk twice carved open the home defence turned the game on its head.
Alan Gow and Pedro Moutinho were the Falkirk scorers, and it was a result the visitors deserved with their attractive one- touch play.
Rangers could have taken an early lead when Steven Thompson shot narrowly past the upright, although he might have been better laying the ball off to the unmarked Thomas Buffel. A Russell Latapy free-kick from 25 yards was only inches wide as Falkirk fought back.
Just before the half-hour mark Rangers were unlucky not to take the lead. Thompson's pass released Lovenkrands but Falkirk keeper Matt Glennon blocked the Dane's first effort and then he struck the post with the rebound.
The home side got the break they were seeking shortly after when Buffel's cross deflected off Ireland into the net.
Thompson should have added to this lead, but the striker hit his shot against Ireland in front of an open goal.
Earlier in the second half Rangers were awarded a soft penalty when Kenny Milne brought down Chris Burke and Lovenkrands converted the spot-kick.
A tremendous strike from edge of the box by Gow, who was allowed the freedom to turn, brought Falkirk back into the game. The visitors drew level when Gow threaded the ball through to Pedro Moutinho, who guided his shot home.
The home team might have had a penalty near the end when Thompson appeared to be dragged down, but Rangers were booed off the park in the end in an already half deserted stadium.