Thousands of tourists travel to Bethlehem every year at Christmas time
With thousands of tourists - mostly religious pilgrims - visiting the city, locals are keen to show that it is a safe, welcoming place.
Meanwhile, Palestinian officials are using the occasion to highlight the problems caused by nearby Jewish settlements and Israel's separation barrier, which blocks access to Jerusalem.
A number of local people, with familiar names and roles, here explain their views on life in modern Bethlehem.
JOSEPH THE CARPENTER: Joseph Lulos
I work with olive wood and I make things especially for Christmas.
The tourists buy our nativity sets. Right now I am working on a grotto. It is all carved by hand.
Once it's done you can put in the whole Christmas group - the baby Jesus, the Virgin Mary, Joseph, the shepherds, their sheep and the cow and donkey.
This kind of wood grows locally. When the tree doesn't produce enough olives, the farmers cut off the wood and sell it to us. Of course it's expensive and it also takes a lot of time to make these objects, so that's reflected in the price.
Now we have a lot of competition from Chinese-made souvenirs.
Tourists used to come looking for a keepsake that was produced in the holy land but now they settle for something cheap. This year, trade has been slow.
I inherited this craft from my father who's been in the business for 60 years. I've been at it for about 20 years now.
Of course it's special because of the connection to St Joseph. He's the one who brought up the Lord Jesus himself with this profession.
THE NEW MOTHER: Roula Bandaq
It's a very beautiful feeling that I gave birth to my babies in Bethlehem, close to the Nativity Church. This is a special time because it's when Jesus was born.
The due date for my twins was actually on Christmas Day but in the end they came a bit early.
Still, there were no problems. Already I have a daughter so now I have three girls. We have called these two Lourdes and Lama.
As well as giving birth at the Holy Family Hospital, I also work here.
It's a great place and I've had a lot of support from the doctors and nurses and my other friends.
Nowadays this is where most babies in Bethlehem are born.
THE INNKEEPER: Joseph Canawati
I am the owner of the Alexander Hotel on Manger Street in Bethlehem. We have no rooms free this Christmas - we are 100% full. Many of our guests are Arab-Christians who've come from Israel - the 1948 Palestinians.
Usually the Christmas season is good. But this year has not been as good as 2010, which was excellent. We've not seen so many tourists in the hotels. It's because of the Arab Spring and the world economic situation.
Tourism needs quiet and political stability yet here in the Middle East we often don't have that. Business goes up and down. Generally, things have been better in Bethlehem in recent years because the Palestinian Authority completely controls the security and it's very safe.
A problem we have is that most tourists who come here don't spend much time in Bethlehem. A lot are brought here for a few hours when they stop off on Mediterranean cruises in Israeli ports. But the main reason is that the Palestinians don't control any borders so all the tourists who come here, come through Israel.
We need a Palestinian state so we can have our own borders, our own tourists and agenda and our own destiny.
Bethlehem is the best of the best, this is where our Lord Jesus was born and this is where King David and King Solomon were from. We are just 10 minutes from Jerusalem. It's a peaceful place and we encourage everyone to come here.
THE SHEPHERD: Mohammed Salem
A long time ago, before [the creation of the state of Israel in] 1948, we used to roam around these mountains and we'd spend the night here in tents.
We took water from the wells or the spring in Bethlehem if they went dry. Back then there was plenty of food around for the sheep to graze.
To help make ends meet, we also used to collect salt from the Dead Sea and transport logs from here on donkeys to sell to nearby villages. Back then there was no war and we were comfortable. We were only scared of wolves and hyenas!
At that time there was not a single house. All of these are new. The Jewish people built most of them about 10 years ago. They have been taking more land bit by bit. The settlement [of Har Homa] goes all the way around the mountain we call Jabal Abu Ghneim. They built a big, strong wall all around it. It took all this land.
We don't dare to go near the wall or the settlement so nowadays we just stay around here. I tell my son, Mahmoud, to be careful where he takes the sheep.
THE WISE MAN: George Saadah, deputy mayor of Bethlehem
Bethlehem is the capital of the Christian world where our Lord Jesus Christ was born. It is a blessing, a gift for the Palestinians. We hope this Christmas will bring hope for the Palestinian people. We pray for justice and an end to the occupation by Israel.
More than 2,000 years ago our Lord Jesus brought a message of peace for the whole world but unfortunately in the holy land itself we are still suffering from conflict and injustice. We have to pray to have an independent Palestinian state and for peace in Palestine, Israel and the whole region.
We invite people from all over the world to celebrate Christmas with us. Our programme this year started on 15 December with the lighting of the Christmas tree. Every night we have a celebration - there are Christmas carols, singing in the square and inside the church.
On the 24th, Christmas Eve, we have a big celebration welcoming the parade of the Patriarchate of Jerusalem, our twin city, entering from this road. The parade has to pass three iron gates through the wall [Israel's separation barrier], but this door will be open.
As usual the Palestinian President, Mahmoud Abbas, will also attend the Christmas Mass.
We hope we will have a minimum of 50,000 people visiting us from all over the place. Although Bethlehem is surrounded by a separation wall, it's open for everyone to come and celebrate Christmas here.