On a crisp, sunny day revelers crowded into Manger Square, stopping in restaurants and admiring the town's Christmas tree. Scout troops played bagpipes, horns and drums entertained the visitors, while merchants hawked Santa hats and special sesame sweets for the holiday.
"My son and I, and my husband, came for Christmas to see, you know - be right here where it all took place," said Irene Adkins, 63, from Lorain, Ohio, sitting in one of Bethlehem's visitor's centers. "It feels wonderful."
The celebrations brought a boost of holiday cheer to the area after a difficult year. Israeli-Palestinian peace talks collapsed last spring, and Israel battled Hamas in the Gaza Strip during a 50-day war over the summer.
For residents of the Palestinian town of Bethlehem, an independent state is as elusive as ever. The Church of the Nativity, built over the grotto that Christians believe is the site of Jesus' birth, was flanked by a towering Christmas tree and a large poster in Arabic and English that read "All I want for Christmas is justice."
"Our message this Christmas is a message of peace like every year, but what we added this year is that all we want from Christmas is justice. Justice for our people, justice for our case and the right to live like all other people in the world in our independent state without the occupation," said Palestinian Tourism Minister Rula Maaya.
Latin Patriarch Fouad Twal led a procession from his Jerusalem headquarters into Bethlehem, passing through Israel's concrete separation barrier, which surrounds much of the town. Israel built the barrier a decade ago to stop a wave of suicide bombings. Palestinians view the structure as a land grab that has stifled the town's economy.
Twal said he hopes 2015 will be better than the past "difficult" year. "I hope next year there will be no separation wall, and I hope we will have bridges of peace instead," said Twal, who was to lead Midnight Mass at the church later in the evening.
Simon Bassett, a British tourist, came to Bethlehem with his wife and three-year-old daughter.
"We're very happy to share Christmas with the Palestinian people and we hope that the peace and joy that comes with Christmas will spread from this place to the whole earth and that the people of all races will learn to live in harmony together," Bassett said.