Islam is a complete way of life and it suffices Muslims. At the same time, we should be interactive and proactive. We should not forget our role in the society. We should be a good example to others. Islam urges us to be kind with all people without any kind of discrimination due to differences in faith or race.
Muslims have their own identity. In order to keep this identity, Muslim scholars said that Muslims must not celebrate Christmas or holidays of non-Muslims. By participation in Christmas, it is possible that slowly one may lose his or her consciousness of this basic point of difference between Islam and Christianity. Muslims must be very careful in this matter. The greatest danger is for our next generation, who may slowly lose their Islamic faith in tawhid and may start believing in Jesus as “more than a prophet and servant of Allah. We should tell our children that we are Muslims and this is not our holiday. This is the holiday of our Christian neighbors and friends. We may give greetings to our Christian friends and neighbors on their holiday, but we should not make it our own holiday.
In this regard, Dr. Muzammil H. Siddiqi, former President of the Islamic Society of North America, states the following:

The Prophet (peace and blessings be upon him) said, “Every people have their `Eid…” Some celebrations are of a religious nature, and some others are social and cultural. Some celebrations are based on beliefs and practices that are contrary to Islamic teachings, and some celebrations are not of that nature. Some people claim that Christmas is now a secular holiday and it is very much an American national holiday rather than a religious holiday. But it is wrong to assume that because this holiday is national, it has ceased to be Christian. It is true that this holiday is very popular and it is extremely commercialized; nevertheless it is basically a religious holiday. Its very name and all its symbolism is Christian through and through.
Christians celebrate at Christmas what they believe to be the “day of the birth of God’s Son” or what they call “God Incarnate”. Thus it is not only a celebration of another religion, it is also a celebration that is based on a belief that is totally against the teachings of Islam. From the Islamic point of view, the belief in the “Son of God” or “God in the flesh” is a blasphemy and kufr (denial of God’s Oneness). By participation in Christmas, it is possible that slowly one may lose his or her consciousness of this bas
ic point of difference. Muslims must be very careful in this matter. The greatest danger is for our next generation, who may slowly lose their Islamic faith in tawhid and may start believing in Jesus as “more than a prophet and servant of Allah”.
the argument that “Christmas is, after all, Prophet Jesus’ birthday and so there is no harm in celebrating Christmas” is neither logical nor Islamic. Why should Muslims celebrate Jesus’ birthday? Why not the birthdays of the other 24 prophets and messengers who are mentioned in the Qur’an by name? For us Prophet Muhammad (peace and blessings be upon him) is the final Prophet and Messenger of Allah, not Jesus. Christians believe that Jesus was the last one and they say that “after God spoke through many prophets … in these last days he spoke to us through his son whom he made to inherit every thing” (New Testament, Hebrews 1:1). Thus they celebrate his coming, but for us Muslims, Prophet Muhammad was the last Prophet and Allah appointed him for all people and for all times to come.
I do agree that our little children are deeply affected with the festivities and glitter of this holiday. We should try to take them to some Islamic camps and conferences at this time and give them some other alternate programs and activities. But Muslim families should not have Christmas trees in their homes, nor should they put up lights inside or outside their homes at this time. We should tell our children that we are Muslims and this is not our holiday. This is the holiday of our Christian neighbors and friends. We may give greetings to our Christian friends and neighbors on their holiday, but we should not make it our own holiday.

Explaining the reasons why Muslims don’t celebrate and believe in Christmas, Sheikh Ahmad Kutty, a senior lecturer and Islamic scholar at the Islamic Institute of Toronto, Ontario, Canada, states the following:

Christmas was a pagan custom which was adopted into Christianity; it has nothing to do with reverence and love of Jesus, the mighty Messenger of Allah that we Muslims hold in the highest regard and respect. If Jesus were to come today, whether or not he would identify himself with those who celebrate Christmas is a question one should ask seriously.
If we are celebrating the great teachings of Jesus or other prophets, we must do so everyday. To do so means to practice love, mercy, justice and compassion and to be actively engaged in doing the will of God.

Based on what is mentioned above, we can conclude that muslims are permitted to show courtesy to their non-Muslim friends in their festive occasions without violating the teachings of Islam. Attending parties where there are free-mixing between males and females, and free drinking is prohibited for a Muslim.