In Bethlehem, thousands plan to celebrate on December 24 and 25, including the midnight mass at the Church of the Nativity, built on the site considered the birthplace of Jesus.
In good years the West Bank town is flooded with Palestinian and foreign visitors in the days before Christmas.
But in the weeks before festivities this year, the city has at time appeared almost empty of tourists -- with nearby clashes between Palestinian protesters and the Israeli army keeping many away.
In the courtyard next to the church, a towering Christmas tree adorned with lights has had few visitors, apart from street vendors selling Santa hats and Palestinians taking selfies.
Archbishop Pierbattista Pizzaballa, apostolic administrator of the Latin Patriarch of Jerusalem and the most senior Roman Catholic official in the Middle East, told journalists Wednesday there had been a marked increase overall in religious tourists this year.
But since Trump's declaration on December 6, "dozens" of groups had cancelled planned visits.
"Of course this created a tension around Jerusalem and this diverted attention from Christmas," he said.
Jane Zalfou, a 37-year-old Bethlehem Christian, said a lot of Christmas celebrations had been called off following the decision, which had "killed the joy" in the community.
"Music, fireworks and many other things have been cancelled," she told AFP.
"What happened wasn't a small thing -- it is a big deal. The Palestinian people have been waiting for so long to have their rights."
Perhaps as few as 50,000 Palestinian Christians make up only around two percent of the predominantly Muslim population in the West Bank and east Jerusalem.
Israel's tourism ministry denies Christmas has been negatively affected, saying they are running free shuttles between Jerusalem and Bethlehem for mass.
The ministry says it expects a 20-percent increase in Christian pilgrims over the course of 2017 compared to the year before.
Evangelical support
Israel seized east Jerusalem in the 1967 Middle East war and later annexed it, in moves never recognised by the international community.
Palestinians view east Jerusalem as the capital of their future state, but Israel sees the whole city as its undivided capital.
The international community does not recognise Jerusalem as Israel's capital, instead keeping embassies in Tel Aviv.
The Palestinians interpreted Trump's statement as rejecting their right to a capital in east Jerusalem, though the Americans deny this.
In the latest international show of support for the Palestinians, the United Nations General Assembly on Thursday rejected the US decision on Jerusalem by a vote of 128 to nine.
Trump's announcement was the fulfilment of a campaign promise which was particularly important to evangelical Christian supporters -- with Pence included among them.
The evangelical Christian movement is overwhelmingly supportive of Israel, whose founding they see as the fulfilment of biblical prophecy.
Influential US evangelical Christian Laurie Cardoza-Moore said they want to see a third Jewish temple built in Jerusalem to help facilitate Christ's second coming, but their support for Israel was based not merely on scripture.
"Like Judaism, Christianity believes that the Messiah will one day sit on the throne of David in Jerusalem," she said in a statement to AFP.
The irony that American Christian support is one of the driving factors in Trump's embassy move is not lost on Palestinian Christians.
They see their fate as part of the wider Palestinian community, which views Israel's occupation as the largest problem they face.
Mitri Raheb, pastor of the Evangelical Lutheran Christmas Church in Bethlehem, said Christian Americans supporting Israel were ignoring the ongoing occupation of the Palestinian territories.
"The essence of the Bible is freedom, not slavery, liberation not occupation," he told AFP.
"Unfortunately Trump and his people are sacrificing the Palestinian Christians for their political agenda."
Palestinians from the West Bank, including Christians, need special permits to visit Jerusalem, while the Jewish state has built a wall surrounding most of the city.
Georgette Qassis, a 65-year-old from Bethlehem wrapped in a blue scarf embroidered with the word Jesus in English, agreed.
"Who gave Trump the right? We did not," she said. "The Palestinian people are here on this great land. They should have asked for our opinion."
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