Short answer
Yes. Celebrating Christmas as a festival is not permitted for Muslims in the Hanafi school or the other three, because it is a religious festival of another faith. You can still be kind to Christian family and colleagues, accept their gifts and enjoy the day off. Avoid the religious rites, the decorations and parties with alcohol.
Taking part in the festivals of other religions, decorating for them, or giving gifts to honour the day is haram, and the Hanafi texts warn that doing it out of reverence for the festival can reach disbelief. Ordinary kindness, accepting gifts and seeing family on the day without celebrating are permitted.
The four schools agree on this.
Explanation
Muslims love and honour Isa (Jesus) as one of the greatest prophets. But Christmas celebrates his birth as the son of God, a belief the Quran rejects. Joining the celebration means taking part in that meaning, which is why the four schools agree that Muslims do not celebrate it. See Islam and Christianity.
The Quran praises those who 'do not testify to falsehood', and several early scholars such as Ibn Sirin and al-Dahhak explained this as not attending the festivals of other faiths. The Hanafi books go further: they say a Muslim who gives a gift on a non-Muslim festival to honour the day puts his faith in danger. Islam has its own two Eids.
At the same time, Allah does not forbid kindness to those who live in peace with us, and He told us to keep good company with non-Muslim parents. So:
- Christian parents and family: visit them, eat halal food with them, give them your time. Converts should not cut their families off.
- Gifts: you may accept a gift from a colleague or neighbour. Give your own gifts at another time, such as Eid.
- Work parties: it is best to avoid them. If attending is expected, many scholars allow a short appearance for a meal with no alcohol and no religious rites.
- Trees, nativity scenes, Secret Santa: not for a Muslim home. Opt out of Secret Santa politely.
For the greeting itself, see can Muslims say Merry Christmas.
The evidence
Quran, Surah Al-Furqaan 25:72
وَٱلَّذِينَ لَا يَشْهَدُونَ ٱلزُّورَ وَإِذَا مَرُّوا۟ بِٱللَّغْوِ مَرُّوا۟ كِرَامًۭا ﴿٧٢﴾
And [they are] those who do not testify to falsehood, and when they pass near ill speech, they pass by with dignity.
Early scholars explained this as not attending the festivals of other religions.
Quran, Surah Al-Mumtahana 60:8
لَّا يَنْهَىٰكُمُ ٱللَّهُ عَنِ ٱلَّذِينَ لَمْ يُقَٰتِلُوكُمْ فِى ٱلدِّينِ وَلَمْ يُخْرِجُوكُم مِّن دِيَٰرِكُمْ أَن تَبَرُّوهُمْ وَتُقْسِطُوٓا۟ إِلَيْهِمْ ۚ إِنَّ ٱللَّهَ يُحِبُّ ٱلْمُقْسِطِينَ ﴿٨﴾
Allah does not forbid you from those who do not fight you because of religion and do not expel you from your homes - from being righteous toward them and acting justly toward them. Indeed, Allah loves those who act justly.
Kindness and fairness to peaceful non-Muslims are allowed and praised.
Quran, Surah Luqman 31:15
وَإِن جَٰهَدَاكَ عَلَىٰٓ أَن تُشْرِكَ بِى مَا لَيْسَ لَكَ بِهِۦ عِلْمٌۭ فَلَا تُطِعْهُمَا ۖ وَصَاحِبْهُمَا فِى ٱلدُّنْيَا مَعْرُوفًۭا ۖ وَٱتَّبِعْ سَبِيلَ مَنْ أَنَابَ إِلَىَّ ۚ ثُمَّ إِلَىَّ مَرْجِعُكُمْ فَأُنَبِّئُكُم بِمَا كُنتُمْ تَعْمَلُونَ ﴿١٥﴾
But if they endeavor to make you associate with Me that of which you have no knowledge, do not obey them but accompany them in [this] world with appropriate kindness and follow the way of those who turn back to Me [in repentance]. Then to Me will be your return, and I will inform you about what you used to do.
Non-Muslim parents are still owed kindness and good company.
Sunan Abi Dawud 1134
Graded sahih... إن الله قد أبدلكم بهما خيرا منهما يوم الأضحى ويوم الفطر ...
"Allah has given you in place of them something better: the day of al-Adha and the day of al-Fitr."
Muslims have their own festivals.
Sunan Abi Dawud 4031
Graded hasan sahih... من تشبه بقوم فهو منهم ...
"Whoever imitates a people is one of them."
Copying the religious customs of another faith is forbidden.
Where the ruling is recorded
- al-Bahr al-Ra'iq, Kitab al-Siyar, chapter on the rulings of apostates. Giving gifts to honour a non-Muslim festival is treated as very grave.
- al-Fatawa al-Hindiyya, Kitab al-Siyar, chapter on the rulings of apostates. Lists acts around non-Muslim festivals that endanger faith.
- Ahkam Ahl al-Dhimma (Ibn al-Qayyim), Section on the festivals of non-Muslims. Sets out why Muslims do not join other faiths' festivals.
This answer is pending review by the scholars on our team. Quran translation by Sahih International. Hadith Arabic from the standard editions of the six books and the Muwatta, with gradings as recorded there; the English is our own rendering. Spotted a mistake? Tell us.