Traditionally, the main focus of Christmas decorations in Italy is the presepe, Nativity scene or creche. Nearly every church will have a presepe and they are often found outdoors in a square or other public area as well. The nativity scenes are usually set up for about a month, starting around December 8, the Feast Day of the Immaculate Conception.
Many people set up a small Christmas crib in their house and figurines for nativity scenes are made in many parts of Italy, with some of the best coming from Naples and Sicily. Although the presepe is usually set up before Christmas, the baby Jesus is added to the nativity on Christmas Eve.
The Nativity scene or Christmas crib is said to have originated with St. Francis of Assisi in 1223. Although he may not have been the first to construct one, he started the tradition when he constructed a nativity scene out of straw in a cave in the town of Greccio and held Christmas Eve mass there.
Greccio reenacts this event each year. Carving figurines for nativity scenes started in the 13th century.
Here's the video of 2015-2016 home-made nativity scene from Rome.
Naples is the best city to visit for their presepi. Hundreds of nativity scenese are erected throughout the city. Some creches are very elaborate and may be handmade or use antique figures. The street Via San Gregorio Armeno in central Naples is filled with displays and stalls selling Nativity scenes.
Vatican City erects a huge presepe in St. Peter's Square for Christmas. Midnight mass is held in St. Peter's square on Christmas Eve, too.
In Rome some of the biggest and most elaborate presepi are found in Piazza del Popolo, Piazza Euclide, Santa Maria in Trastevere, and Santa Maria d'Aracoeli, on the Capitoline Hill. A life-size nativity scene is set up in Piazza Navona where a Christmas marketplace is also set up. The Church of Saints Cosma e Damiano, by the main entrance to the Roman Forum, has a large nativity scene from Naples on display all year.
Bethlehem in the Grotto - an elaborate lifesize nativity scene is created each year and transported to a beautiful grotto in the Abruzzo commune of Stiffe, about 20 miles from L'Aquila. The scene is illuminated and can be visited during December.
Verona has an international display of nativities in the Arena through January.
Trento in northern Italy's Alto-Adige region has a large nativity scene in Piazza Duomo.
Celleno, a tiny town in the northern Lazio region about 30 km from Viterbo, has a magnificent presepe that is set up for viewing all year. Celleno is also famous for its cherries.
Many churches in Milan have elaborate nativity scenes set up around Christmas time.
Il Museo Nazionale di San Martino in Naples has an elaborate collection of nativity scenes from the 1700s.
Il Museo Tipologico Nazionale del Presepio, under the church of Saints Quirico e Giulitta in Rome, has over 3000 figurines from all over the world made out of almost anything you can imagine. The museum has very limited hours and is closed in summer but they are open each afternoon December 24-January 6. In October they have a course where you can learn to make presepe yourself. Phone 06 679 6146 for information.
Il Museo Tipologico del Presepio in Macerata in the Marche region has more than 4000 nativity pieces and a 17th century presepe from Naples.
Living nativity scenes, presepi viventi, are found in many parts of Italy with costumed people acting out the parts of the nativity. Often living nativity scenes are presented for several days, usually Christmas Day and December 26, and sometimes again the following weekend around the time of Epiphany, January 6, the 12th day of Christmas when the three Wise Men gave Baby Jesus their gifts.
Barga. a beautiful medieval hilltown in northern Tuscany, has a living nativity and Christmas pagaent on December 23.
Chia, near Soriano, holds a large living nativity on December 26 with more than 500 participants.
There's also one nearby in Bassano.
Custonaci, a small town near Trapani in Sicily, has a beautiful nativity scene re-enacted inside a cave. A tiny town was buried in the cave by a landslide in the 1800's. The cave has been excavated and now serves as a setting for the interesting live nativity events December 25-26 and early January. More than just a nativity, the village is set up to resemble an ancient village with craftspeople and small shops. More information about Il Presepe Vivente di Custonaci - although it's in Italian there are some great photos on the galleria foto link.
Vetralla, in the northern Lazio region, has the oldest living nativity in the region. According to Mary Jane Cryan of Elegant Etruria, in 2006 they will celebrate with a commemorative coin to remember the 200th anniversary of Cardinal Stuart's visit to Vetralla in 1776. She has an article about more presepi vivanti in her area under the Lifestyles link.
Rivisondoli, in the Abruzzo region, has a reenactment of the arrival of the 3 kings on January 5 with hundreds of costumed participants. Rivisondoli also presents a living nativity December 24 and 25.
L'Aquila and Scanno also in the Abruzzo region have living nativities on Christmas Day as do many other small villages in the region.
Liguria has living nativity scenes in the towns of Calizzano, Roccavignale, and Diano Arentino during December.
Milan has an Epiphany Parade of the Three Kings from the Duomo to the church of Sant'Eustorgio, January 6.