He had been deputy commissioner of counterterrorism since 2006.
The 41-year-old Falkenrath was an architect of the department's efforts to detect and thwart terror threats.
He has overseen an initiative to fortify Lower Manhattan with a network of closed-circuit security cameras, checkpoints and license-plate readers.
In a statement, Police Commissioner Raymond Kelly thanked him for his "outstanding service."
Before he joined the NYPD, Falkenrath was a national security aide for the Bush administration.
NYPD spokesman Paul Browne says there is no word yet on who would replace him or where he'll work after his departure.
