Their Palestinian hosts, who welcome this holiday as the high point of their city's year, were especially joyous this season, proud of the United Nations' recognition of an independent state of Palestine just last month.
"From this holy place, I invite politicians and men of good will to work with determination for peace and reconciliation that encompasses Palestine and Israel in the midst of all the suffering in the Middle East," said the top Roman Catholic cleric in the Holy Land, Latin Patriarch Fouad Twal in his annual address.
Back at the Vatican, Benedict offered encouragement to countries after the Arab spring of democracy protests. He had a special word for Egypt, "blessed by the childhood of Jesus."
Without citing the tumultuous politics and clashes in the region, he urged the North African region to build societies "founded on justice and respect for the dignity of every person."
Benedict prayed for the return of peace in Mali and harmony in Nigeria, where, he recalled "savage acts of terrorism continue to reap victims, particularly among Christians."
The Vatican for decades has been worried about the well-being of its flock in China, who are loyal to the pope in defiance of the communist's government support of an officially sponsored church, and relations between Beijing and the Holy See are often tense.
Speaking about China's newly installed regime leaders, Benedict expressed hope that "they will esteem the contribution of the religions, in respect for each other, in such a way that they can help to build a fraternal society for the benefit of that noble people and of the whole world."
Acknowledging Latin America's predominant Christian population, he urged government leaders to carry out commitments to development and to fighting organized crime.
In Britain, the royal family was attending Christmas Day church services at St. Mary Magdelene Church on Queen Elizabeth II's sprawling Sandringham estate, though there were a few notable absences. Prince William is spending the holiday with his pregnant wife Kate and his in-laws in the southern England village of Bucklebury, while Prince Harry is serving with British troops in Afghanistan.
Later Tuesday, the queen delivered her traditional, prerecorded Christmas message, which for the first time was broadcast in 3D.
At Canterbury cathedral, Anglican leader Rowan Williams delivered his final Christmas day sermon as archbishop of Canterbury. He acknowledged how the church's General Synod's vote against allowing women to become bishops had cost credibility and said the faithful felt a "real sense of loss" over the decision.
In the U.S., the Rev. Jesse Jackson brought his message of anti-violence and gun control to a Chicago jail, using his traditional Christmas Day sermon at the facility to challenge inmates to help get guns off the streets.
"We've all been grieving about the violence in Newtown, Connecticut, the last few days," he told reporters after addressing inmates, referring to the school shooting that killed 26 children and adults. "Most of those here today ... have either shot somebody or been shot. We're recruiting them to help us stop the flow of guns."
Dalia Nammari in Bethlehem, Cassandra Vinograd in London and Sophia Tareen in Chicago contributed to this report.
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