The Pope has marked Christmas with a Mass in the Vatican and asked if people still have room for children, the poor and God in their technology-driven lives.
The pontiff also prayed that Israelis and Palestinians live in peace and freedom, and asked the faithful to pray for strife-torn Syria as well as Lebanon and Iraq.
The Pope's Christmas Eve ceremony began at 10pm local time with the blare of trumpets, meant to symbolise Christian joy over the news of Christ's birth in Bethlehem.
As midnight neared, church bells tolled throughout Rome, while inside the basilica, the voices of the Vatican boys' choir resounded joyously.
Christmas Eve Mass at the Vatican traditionally began at midnight, but the start time was brought forward years ago to give the 85-year-old pontiff more time to rest before his Christmas Day speech.
A smiling Benedict, dressed in gold vestments, waved to applauding church-goers as he glided up the St Peter's Basilica aisle toward the ornate main altar on a wheeled platform guided by white-gloved aides.
In his homily, Benedict urged people to reflect upon what they find time for in their busy lives.
He said: "The great moral question of our attitude toward the homeless, toward refugees and migrants takes on a deeper dimension. Do we really have room for God when he seeks to enter under our roof? Do we have time and space for him?
"The faster we can move, the more efficient our time-saving appliances become, the less time we have. And God? The question of God never seems urgent."
He continued: "Let us pray that Israelis and Palestinians be able to live their lives in the peace of the one God and in freedom."
On Christmas Day, the Pope delivered the Vatican's traditional message from the central balcony of St. Peter's Basilica.
He again spoke of political turmoil across the world, encouraging Arab spring nations, especially Egypt, to build just and respectful societies.
He also prayed that China's new leaders respect religion, a reference to persecution Chinese Roman Catholics have at times endured under communism.
In his "Urbi et Orbi" speech, which traditionally reviews world events and global challenges, the pontiff prayed that "peace spring up for the people of Syria, deeply wounded and divided by a conflict that does not spare even the defenseless and reaps innocent victims."
He also called for easier access to help refugees and for "dialogue in the pursuit of a political solution to the conflict."