The sensational claim was made today at an Australian court, where a man is accused of murdering the Huddersfield tourist.
Two witnesses in the murder trial have given evidence that they saw the backpacker alive eight days after he was allegedly murdered.
Bradley John Murdoch, 47, has denied killing Mr Falconio, of Hepworth, near Barrow Creek in July 2001.
Robert Brown and Melissa Kendall have both given evidence to the Northern Territory Supreme Court trial in Darwin today.
They said they were working at a service station at Bourke in outback New South Wales the weekend after Mr Falconio disappeared.
They said a man they recognised as the missing tourist from newspaper photographs entered the shop on the Sunday.
Mr Brown and Ms Kendall both said they were certain it was him.
He was travelling with another man and a dog in a dark green utility vehicle.
Mr Brown said he noticed a slight accent that was not from Australia.
He said the man bought a chocolate bar and a drink.
Ms Kendall told the Supreme Court the man used the toilet and bought a drink at the Bourke service station on Sunday, July 22, 2001.
He was with another "scary" looking man, who bought two packets of dog biscuits.
"I was just shocked, I just didn't know what to do," Ms Kendall said.
Falconio's mother Joan and brother Nick walked out of the courtroom during Mr Brown's testimony and remained outside for most of his time on the stand.
Murdoch, a mechanic from Broome, Western Australia, has pleaded not guilty to Mr Falconio's murder beside the Northern Territory's Stuart Highway on July 14, 2001 and to assaulting Mr Falconio's girlfriend Joanne Lees, of Almondbury, and depriving her of her liberty.
Ms Kendall said she saw a photograph of Mr Falconio in the newspaper that day. She saw the man she said was Mr Falconio later that afternoon for 20 seconds.
Ms Kendall described the man in his late 20s as solid, with a shaved head, a fair complexion and injury to his left side of this face.
She did not notice if he spoke with an accent.
The man's companion was "a very rough looking person", skinny, with dark hair, olive skin, and a dirty white T-shirt covered with red dust.
Mr Falconio's body has never been found.
It was not immediately clear why Brown and his girlfriend Ms Kendall were called as witnesses by prosecutors.
Another witness has testified that she saw the accused, Bradley John Murdoch, with a silver gun.
Rachel Maxwell has testified that she knew Murdoch in 2001 while she was living in South Australia.
She had gone out for a while with Murdoch's business partner James Hepi, who had a property at Sedan.
She said Murdoch often came to Sedan to run drugs.
At one point she said she came into the house and saw both men, and a silver gun on a table.
The trial continues.