The Christmas is a Christian celebration and is innovated by polytheists. It is not permissible for a Muslim to celebrate it or greet it to anyone as it is an imitation of Kufaar. Moreover, Esa (AS) has nothing to do with it or them.
Apart from being an innovation, it comes under the heading of imitating disbelievers in their religion.
The Prophet (blessings and peace of Allah be upon him) said: “Whoever imitates a people is one of them.”
Narrated by Abu Dawood (3512); classed as saheeh by al-Albaani in Saheeh Sunan Abi Dawood. Its isnaad was classed as jayyid by Shaykh al-Islam Ibn Taymiyah, who said:
The least that can be said about this hadith is that it implies that it is prohibited to imitate them. However the apparent meaning indicates that the one who imitates them is a disbeliever, as Allah, may He be exalted, says: “And if any amongst you takes them as Awliya’ ((friends, protectors, helpers, etc.)), then surely he is one of them” [al-Maa’idah 5:51].
Congratulating or greeting a non-muslim on the occasion of Christmas or any other religious festival is haram according to the majority of scholars. It is because it implies that you approve of what they do and worship. It means you approve of their disbelief.
Even if he does not approve of this disbelief for himself, it is haraam for the Muslim to approve of rituals of disbelief or to congratulate someone else for them. Similarly, it is haraam for the Muslims to imitate the disbelievers by having parties on these occasions, or exchanging gifts, distributing sweets or plates of food, taking time off work, and so on, because the Prophet (blessings and peace of Allah be upon him) said: “Whoever imitates a people is one of them.” Narrated by Abu Dawood.
To sum up: the harm that results from Muslims celebrating the Gregorian New Year (or Christmas) may be summarised in the following points:
1. The intention and motivation of these festivals and parties is shirk. Hence attending such parties or participating in these events is indulging in shirk and imitation of mushrikeen. Also it is not in accordance with the teaching of Prophet Jesus(AS) as he never prescribes any such events for them or us.
So they are a combination of shirk and innovation, in addition to what they mix with that of immoral and evil actions in these parties, as is well known. So how could we imitate them in that regard?
2. The celebration is evil in all aspects. It involves evil and corrupt actions. It is shrik and a asin apart from all the immoral action that happens during it. Based on that we cannot say that it is permissible.
3. If celebrating a birthday of a prophet is of any virtue than why don’t we celebrate the birthdays of all prophets known to us? Are they not prophets worthy enough? Were they not sent by Allah?
4. The knowledge of the birthday of any prophet is not known and is not possible. The exact date of his birth is not known, as the historians differed concerning this matter.
Hence it is better for a muslim to not celebrate this day and be away from it.
And Allah knows best.