"Our message is we love Jerusalem, we'll never abandon you under any circumstances", he said at a press conference in which he announced that singing performances on outdoor stages that are normally part of Nazareth's Christmas Market would be cancelled.
Mayor Ali Salam pointed to Trump's December 6 decision to recognize Jerusalem as Israel's capital - which sparked violent protests and a call from Hamas for an uprising against Israel - as the reason for canceling all holiday plans. "The decision has taken away the joy of the holiday, and we will cancel the festivities this year", he said.
The Muslim-majority town, in what is now Israel, is believed by Christians to be the place where Jesus Christ was raised.
Salam's statement came as the start of the Christmas festivities was set to begin in Nazareth later Saturday with the lighting of the tree.
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The Palestinian towns of Bethlehem - the biblical birthplace of Jesus - and Ramallah briefly turned off their Christmas lights within an hour of the Nazareth announcement, Reuters said, adding that there's no word if Bethlehem also is considering scaling back its celebrations.
But this year the mayor determined that the situation in the region is too fraught for joy because of Trump's decision to recognize Jerusalem as the capital of Israel. The status of Jerusalem is at the center of Israel's conflict with the Palestinians because the city is sacred to Judaism and Islam. About 70 percent are Muslim and 30 percent Christian. Trump has also ordered the US embassy moved from Tel Aviv, though that process is likely to take years.
Benjamin Netanyahu, the Israeli Prime Minister, welcomed Trump's decision as "a new and genuine milestone in the glorious history of this city". The Christian savior also grew up in the town, according to the New Testament. Muslims oppose the move as they see East Jerusalem as a future capital for Palestine.
Hamas, meanwhile, said the decision "opens the gates of hell" and called for several days of protests. "This shows the world that Jerusalem as the capital of Israel is not up for negotiation, and America is and shall always remain a loyal ally of Israel".