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.
President Donald Trump may not know how to celebrate Christmas - but he certainly knows how to ruin it for others.
According to the Bible, the city of Nazareth is where the archangel Gabriel told the Virgin Mary she would bear the saviour, making it one Christianity's holiest sites.
Nazareth - the hometown of Jesus - has cancelled Christmas.
About 20 percent of Israel's overall population is Arab, and numerous country's Muslim citizens are unhappy with Trump's recognition of Jerusalem as the capital of a Jewish state.
"It is time to officially recognize Jerusalem as the capital of Israel", he said.
Approximately 69 percent of the Arab town's 76,000 inhabitants are Muslims and 30 percent are Christians.
Trump's decision reversed decades of USA policy as a mediator and has jeopardized its peace efforts in the Middle East.
It comes amid a backlash across the region after Mr Trump announced he would begin the process of shifting the United States embassy in Israel to Jerusalem, after symbolically recognising it as the capital of the country.
He also called on the Pope, churches and "our Christian brothers to devote their Sunday prayers to Jerusalem".
"Our identity and faith aren't up for debate", Ali Salam, the Muslim mayor of Nazareth, said on Thursday.
Mayor Ali Salam, a Muslim, ordered all artistic events to be canceled - including a festival and large Christmas market. "The decision [by Trump to recognize Jerusalem] has taken away the joy of the holiday, and we will thus cancel the festivities this year".
There have been widespread protests across the world in condemnation of Trump's decision with only Israel and the USA supporting his plan.
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.
Mayor Ali termed Trump "wretched" and said the U.S. president had "stabbed" Palestinians with the Jerusalem decision.