Liverpool, who signed Flynn from Falkirk in 2005, are willing to loan out the 20-year-old so that he can continue his development and get regular first-team action under his belt.
Bairns boss Eddie May was delighted to land Flynn for the new season.
"We have followed Ryan's career with great interest and Ross Wilson and I have been down to Liverpool on a number of occasions to watch him play," May told the club's official website.
"He has always been very highly regarded by the Liverpool people and I am delighted to bring him back to the club.
Flynn was happy to make the move back to Falkirk, turning down other options to return to Scotland in the process.
"I am over the moon to be coming back to Falkirk, I loved my time here in the academy and most of the lads are still here which is great," noted Flynn.
"There were a number of options for me but as soon as I spoke to Eddie and knew Falkirk were interested I couldn't wait to get here and get it all signed."