Although the family Falconidae, which includes extant falcons and caracaras, has a long evolutionary history, most previously reported fossils referred to this family are isolated single elements. We report a new species, Falco hezhengensis sp. nov., represented by a nearly complete and articulated skeleton from the Late Miocene deposits of Linxia Basin in northwestern China. The new fossil shares an array of derived morphologies with the genus Falco, and analysis of the largest morphological dataset for Falconidae, sampling most genera, identifies the specimen as a new stem kestrel. The phylogeny shows a high degree of congruence with published molecular phylogenies and time trees supporting a Miocene radiation of Falconidae. The species provides a new calibration for the divergence of extant kestrels from other Falco. Remains of a small mammal, a jerboa (Dipodidae), are preserved in the abdominal region of the specimen. Integrated with data from other avian remains from the Linxia Basin, the new fossil provides further support for changes in the open steppe environment of Central Asia since the Late Miocene. Changes in falconid ecology and diet, shifts in small-mammal abundances, as well as the extinction of the Central Asian ostrich may be involved in community turnover in the Late Neogene.