It is his first selection under British Judo's head coach Patrick Roux, who be delighted to see the 28-year-old Englishman back as London 2012 looms into view.
The 2005 world champion made his return with a change in weight category at thesenior British Trials last month and will fight in the -66kg competition in Budapest.
"Competing at his new weight, it will be important to assess Craig's return to this level of international competition after a long break and to see how he is adjusting at -66kg," said Roux.
After self-funded trips to the 2010 Swedish European Cup and 2010 Finnish Open last year, and impressing at the senior trials, this event will be Fallon's first major step on the road to a place in London 2012.
The event, which will be held on Saturday and Sunday (February 12 and 13) in the Hungarian capital, will also see Ashley McKenzie, Tom Davis, Andrew Burns and James Austin compete in the first World Cup of the year.
With a gold medal win at the British Trials, Davis will be looking to put in another top performance in the -81kg weight category, as Roux selects him for the first time since his bronze medal win at the 2010 Slovenian European Cup last June.
Austin cemented his place on the team in the -100kg weight category by winning gold at the British Trials and picking up a silver medal a week later at the 2011 Belgium Open.
Burns also medalled at both events, taking silver at the British Trials and winning a bronze medal in Belgium, and will contest the -90kg category.
Much to McKenzie's disappointment, he was unable to compete at the Senior Trials after picking up a back injury.
After working closely with English Institute of Sport (EIS) and British Judo Performance Institute (BJPI) support staff, the -60kg fighter is ready to return to action.
"We have entered the intensification phase of the programme with 18 months left to the Olympic Game," said Margaret Hicks, British Judo's performance director.
"For a number of players the plan is geared toward performance at the European Championships in April and, of course, the World Championships in Paris in August. "
GB's first major outing of the year was the 2011 Paris Grand Slam last weekend where Gemma Howell in the -57kg category, Gemma Gibbons in the -70kg and Sarah Adlington in the +78kg competed.
Howell and Adlington both reached the second round, Howell beat the Netherlands Juul Franssen but lost to Italy's Olympic champion Guilia Quintavalle while Adlington beat the Netherlands' Janine Penders and lost to South Korea's world ranked number seven Na-Young Kim.
Gibbons suffered a tough first round defeat against -70kg Japan's Haruka Tachimoto.
May 2006: Fallon enters the history books