"The path [to statehood] remains long, and will require a united effort," added Twal, a Palestinian citizen of Jordan, at the patriarchate's headquarters in Jerusalem's Old City.
Then he set off in a procession for the West Bank city of Bethlehem, Jesus' traditional birthplace. There, he was reminded that life on the ground for Palestinians has not changed since the U.N. recognized their state last month in the Israeli-occupied West Bank and east Jerusalem and the Hamas-ruled Gaza Strip.
Twal had to enter the biblical town through a massive metal gate in the barrier of towering concrete slabs Israel built between Jerusalem and Bethlehem during a wave of Palestinian suicide bombings in the last decade. The Israeli military, which controls the crossing, said it significantly eased restrictions for the Christmas season.
Israel, backed by the United States, opposed the statehood bid, saying it was a Palestinian ploy to bypass negotiations. Talks stalled four years ago.
Hundreds of people greeted Twal in Manger Square, outside the Church of Nativity. The mood was festive under sunny skies, with children dressed in holiday finery or in Santa costumes, and marching bands playing in the streets.
After nightfall, a packed Manger Square, resplendent with strings of lights, decorations and a 55-foot Christmas tree, took on a festival atmosphere.
A choral group from the Baptist Church in Jerusalem performed carols on one side of the square, handing out sheets of lyrics and encouraging others to sing along with songs such as "We Wish You A Merry Christmas."
Festivities led up to the Midnight Mass at St. Catherine's Church, next to the fourth-century Church of the Nativity, built over the grotto where tradition says Jesus was born.
Devout Christians said it was a moving experience to be so close to the origins of their faith.
"It's a special feeling to be here, it's an encounter with my soul and God," said Joanne Kurczewska, a professor at Warsaw University in Poland, who was visiting Bethlehem for a second time at Christmas.
Pastor Al Mucciarone, 61, from Short Hills, N.J., agreed.
"We come here to celebrate Jesus. This is a very important town. Great things come from small events. The son of God was born in this small village. We hope all will follow Jesus," he said.
Audra Kasparian, 45, from Salt Lake City, Utah, called her visit to Bethlehem "a life event to cherish forever. It is one of those events that is great to be a part of."
Christmas is the high point of the year in Bethlehem, which, like the rest of the West Bank, is struggling to recover from the economic hard times that followed the violent Palestinian uprising against Israel that broke out in late 2000.
Tourists and pilgrims who were scared away by the fighting have been returning in larger numbers. Last year's Christmas Eve celebration produced the highest turnout in more than a decade, with some 100,000 visitors, including foreign workers and Arab Christians from Israel.
The Israeli Tourism Ministry predicted a 25 percent drop from that level this year, following last month's clash between Israel and Palestinian militants in Gaza, which put a chill on tourist arrivals. Located on the southeastern outskirts of Jerusalem, Bethlehem has the highest unemployment in the West Bank, but the tourist boom of Christmas offered a brief reprieve. Officials say all 34 hotels in the town are fully booked for the Christmas season, including 13 new ones built this year.