The church was built on the site of the stable where, according to Christian tradition, Jesus was born.
The mass was led by the top Roman Catholic cleric in the Holy Land, Latin Patriarch Fouad Twal.
Thousands of Christian tourists and pilgrims from all over the world, as well as local Palestinian and Arab Israeli Christians, flocked to the Biblical city throughout the day, amid a large presence of Palestinian security forces.
Foreign groups performed on a large stadium erected in the central Manger Square in the chilly winter night.
Uniformed Palestinian boys and girl scouts played drums and bagpipes while marching through the historic city, which was lavishly decorated with Christmas lighting and stars.