JOIN USAs day broke on this not-so-little-town which lies just a few miles south of Jerusalem, locals were busily preparing to welcome thousands of pilgrims who want to see the spot where the Bible says Jesus was born to a couple from Nazareth.
Hotels and guest houses across this ancient town perched on the hilltops were packed to capacity, Palestinian officials said, with more than 50,000 visitors from around the world expected to join in the festivities.
"Hotels are full. We have no rooms left even though the number of hotel rooms has multiplied in the last three years," Palestinian tourism minister Khulud Daibes told AFP.
"We expect up to 50,000 people to come in the next two days." This year's theme, she said, was "Palestine celebrating hope."
Christmas Eve celebrations are all taking place in and around Manger Square, the central plaza next to the Church of the Nativity. The church is built over the site where Christians believe Mary gave birth to Jesus in a stable, and laid him in an animal's feeding trough, also known as a manger.
Boy scouts with drums and bagpipes were to march through the town during the afternoon for the annual Christmas parade after which there would be concerts and other entertainment on what is the biggest tourist attraction of the year in the Palestinian territories. A huge Christmas tree covered in lights and glittering decorations dominated the centre of the square, which was already filling up with excited visitors, some wearing red Santa hats, others in the sombre garb of various monastic orders.
Singing filled the square as pilgrims belted out carols in Arabic, and street vendors carried out a brisk trade in cakes, sweets and hot air balloons.
"This is my first time here. It's very surreal," said Josh, a American in his 20s from Arkansas who was wearing a traditional Palestinian keffiyeh scarf.
"Being here in the Holy Land where Jesus is from is great!"
Excited tourists snapped pictures of the giant tree and of a local dressed up as Father Christmas, as a group of foreign activists in Santa hats, each wearing a letter on their clothes, lined up to spell the words: Free Palestine.
There were also Muslims among the crowds, with many veiled women bringing their children to join the celebrations over the birth of Jesus, or "Isa" in Arabic, whom they revere as a prophet.
"I'm here today to see the celebrations like every year -- we come as Christians and Muslims to see them," said Shireen Knaan. "There is no difference between Christians and Muslims as it is the prophet Isa's birthday."
The celebrations were to continue into the night and culminate with a celebration of midnight mass by Latin Patriarch Fuad Twal, the most senior Roman Catholic bishop in the Middle East.
The mass is traditionally attended by top officials from the Palestinian Authority including president Mahmud Abbas and prime minister Salam Fayyad.
Twal is expected to deliver a message of hope for peace in the Middle East and around the world, which was also expected to touch on the revolutions sweeping the Arab world.
In a message delivered earlier this week, Twal acknowledged feeling "a little anxious and concerned" about the ongoing turmoil in the Arab world.
"I have always defended the changes taking place in favour of freedom and democracy. I have repeatedly emphasised that Christians are not excluded from these movements," he said.
Twal urged the ruling authorities to "make every effort to calm the spirits, without violence," demanding they "grasp this moment of opportunity to build a new society based on equal citizenship for all."
He also called for a "just and comprehensive peace" to end the Israeli-Palestinian conflict.
Bethlehem attracts hundreds of thousands of pilgrims each year and is the main tourist attraction in the Palestinian territories.