The XR series was introduced in September 1966. Styling was based on the third generation 1966 US Ford Falcon and it was promoted as the "Mustang bred Falcon". It was the first Australian Falcon to be offered with a V8 engine, the 200 bhp (150 kW), 289 cubic inch (4.7 litres) Windsor unit. The XR marked the first time a V8 engine could be optioned in all trim levels of an Australian car, V8s having previously been reserved for the more up-market variants. The 144 cubic inch (2.4 litre) six cylinder engine was deleted for the XR series leaving the 170 cubic inch (2.8 litre) six as the base Falcon engine. A 200 cubic inch (3.3 litre) six was also available.
The XR series was initially offered in nine different models: Falcon, Falcon 500 and Fairmont Sedans, Falcon, Falcon 500 and Fairmont Wagons, Falcon and Falcon 500 Utilities and the Falcon Van. The new wagons shared the 111-inch (2,800 mm) wheelbase with the XR sedans, unlike the 1966 US Falcon wagons which featured a 115-inch (2,900 mm) wheelbase. The Falcon 500 replaced the Falcon Deluxe of the XP series and the two door hardtop body style available in the XP series was not offered in the XR range.
The Falcon XR won the Wheels Car of the Year award in 1966, giving Ford Falcon two straight wins.
The marketing focus on the Falcon's relationship with the Mustang's sporty appeal led to Ford introducing a Falcon GT variant of the XR in 1967, featuring a 225 bhp (168 kW) version of the 289 cubic inch (4.7 litre) Windsor V8 engine, sourced from the Ford Mustang. The GT heralded the dawn of the Aussie muscle car. All of the original XR GTs were painted in the colour 'GT Gold', except for eight that were "Gallaher Silver" and another five that were "Russet Bronze, Sultan Maroon, Polar White, Avis White and Ivy Green". The non-gold GTs, while having the same specifications, are the rarest of the early Australian muscle cars.