Guests and staff were told to leave the building immediately while officer searched for suspicious activity.
Falmouth is roughly 40 minutes by car from the Carbis Bay Hotel, where leaders from the world’s most powerful democracies will gather for the G7 summit from Friday.
Falmouth is being used as the main base for the world’s media covering the G7 summit.
A spokesperson said: “Following EOD assessment, the device has been declared not viable and therefore safe.
“In total around 100 people were displaced; these people are now being allowed back into their rooms and the 100-metre cordon is being removed.
“A smaller scene guard will remain in place until the item is collected and removed by scenes of crime.
“We currently believe that this was a hoax incident and a criminal investigation has been launched.
“We thank the public and those who were evacuated for their assistance.”
In an earlier statement, Devon & Cornwall Police said: “Police were called at around 3.15am on Thursday, June 10 following reports of a suspicious package having been located on the grounds outside of the Falmouth Hotel, Cliff Road in Falmouth.
“In order to maintain public safety, the area is currently being safely evacuated as a precautionary measure.
“This will impact on those staying within the Falmouth Hotel, Madeira Hotel and campervans in the area, as well as neighbouring properties.
“A 100 metre cordon will be put in place and Royal Navy Explosive Ordnance Disposal [EOD] are en route to the scene.”
The Mirror reports a staff member at the Falmouth Hotel said “it was a bomb scare”.
The outlet also said residents were woken and told to immediately leave the building for the car park.
An officer told the site: “This could all be over in five minutes but equally it could be a lot longer than that.”
EOD officers were later spotted arriving shortly before 5.30am, eye-witnesses at the scene said.