Christians from all over the world flocked to Manger Square in Bethlehem Tuesday to celebrate the birth of Jesus in the West Bank town where it is believed he was born.
Pilgrims lined for hours to enter the Church of the Nativity built under the Roman emperor Constantine in 339AD, which was constructed atop the grotto where Jesus of Nazareth was born.
The worshippers spilled out into the streets around the church where loudspeakers broadcast Christmas day services.
It is estimated that 15,000 people visited Bethlehem for celebrations on Christmas Eve - up 20 percent a year earlier despite tensions in the region.
Fox News said the rise in numbers may have been due partly to the Church of the Nativity's classification this year as a UNESCO World Heritage site.
Christmas eve service was attended by Palestinian Authority President Mahmoud Abbas who called for renewed peace talks with Israel during a dinner in Bethlehem.
More calls for peace were heard during the Pope's annual address to worshippers known as the "Urbi et Orbi" (to the city and to the world) speech.
Pope Benedict XVI delivered the address from the balcony of St. Peter's Basilica where pilgrims gathered below.
The Pope called for an end to the slaughter of the "defenseless" in Syria, said the Associated Press.
He also called for more courage among Palestinians and Israelis to negotiate a peace.
According to Deutsche Welle, the Pope also urged peace in Mali, Nigeria, the Democratic Republic of Congo and Kenya, as well as in Latin America in their fight against crime.
The Pope began his address last night at 10 pm, changing the traditional start time of midnight because the 85-year-old sovereign needed rest before today's celebrations.
In England, the Queen attended the annual morning church service at the St. Mary Magdalene church on her Sandringham estate, northeast of London.
Both Prince William and Prince Harry missed the service, with the former spending the day with his in-laws and the latter serving in Afghanistan as an Apache helicopter pilot.
Later in the day, the Royal Christmas message from the Queen, which will likely praise Britain's troops and efforts during the 2012 Olympics, will be delivered, said the Guardian.
The Royal Christmas message tradition began in 1932 by King George V who was hesitant about using the new medium known as the radio to address the nation.
For the first time, the address will be broadcast on television in 3D.