According to the New Testament, Jesus also grew up in the town.
Approximately 69 percent of the Arab town's 76,000 inhabitants are Muslims and 30 percent are Christians.
The US President Donald Trump said on December 6 that it was "time to recognize Jerusalem as the capital of Israel" and issued an order to begin the transfer of the US Embassy from Tel Aviv to Jerusalem.
Trump announced the move last week, reversing decades of USA policy by recognising Jerusalem as the capital of Israel, jeopardising Middle East peace efforts and upsetting the Arab world and Western allies alike. The disputed city is revered by Jews, Christians and Muslims alike, and is home to Islam's third holiest site.
Trump, who has vowed to broker a historic peace accord between Israel and the Palestinians, declared he will try to resolve one of history's oldest conflicts his way, arguing past approaches, such as delaying the recognition, haven't worked.
This year's Christmas market and festival will not be taking place, however, as Muslim political and world leaders continue condemning Trumps' decision from last week.
"Our identity and faith can not be bargained The decision has taken away the joy of the holiday, and we will cancel the festivities this year", Salam reportedly said. Israel, which considers Jerusalem to be its religious and indivisible capital and wants all embassies based there, welcomed Trumps decision.
"We have made a decision to cancel the traditional Christmas singing and dancing because we are in a time of dispute, because of what Trump has said about Jerusalem", added city spokesperson Salem Sharara.
The annual events are a huge tourist attraction during the Christmas season.
However, it is not confirmed whether the two cities are also considering cutting down on their festivities during a time when tourism is at its peak.
Rohingya killed in first month of Myanmar violence
The Rohingya are a Muslim minority long denied citizenship by the predominantly Buddhist national government. Wa Lone, formerly a senior reporter for the Myanmar Times , joined Reuters in July 2016.