It is called hypnic jerk. It is not entirely clear why it happens but it is thought to be related relaxation of muscles as we go to sleep.
One hypothesis propose that the sudden relaxation of muscles just as we go to sleep causes the stiff body to suddenly go limp, which generates the sensation of falling. Another hypothesis suggests that it is an archaic reflex from when our primate ancestors slept on trees. This reflexed functioned to ensure that a tree sleeping primate was on a secure location before sleeping, so if the brain was uncertain, it would wake the individual to reposition the body. Falling sensation probably functioned to remind the conscious mind that the reason for waking up was the risk of falling. Based on this hypothesis, this reflex can randomly kick in humans under stressful conditions. I have read that some evidence for this hypothesis comes from the fact that hypnic jerk is a lot more common if we sleep at unfamiliar locations, or if a person is sleeping very close to the edge of the bed etc.
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