Celebrations culminated with midnight Mass at the Church of the Nativity.
In a homily, Latin Patriarch Fouad Twal, called on Jews, Muslims and Christians to "live together as equals with mutual respect".
Thousands of pilgrims earlier crowded into Manger Square to watch a procession led by Patriarch Twal.
The most senior Roman Catholic cleric in the Holy Land said he hoped 2015 would be "better than this difficult year".
"I hope next year there will be no separation wall and I hope we will have bridges of peace instead," he added. "Peace comes from justice and we have a cause which we hope will be solved soon."
He appeared to be referring to barrier Israel is building in and around the West Bank, which separates Bethlehem from Jerusalem, and the Palestinians' submission to the UN Security Council of a draft resolution that would set a 12-month deadline to reach a peace deal with Israel.
The following are several pics from Manger square, outside Bethlehem's Church of the Nativity.