Bethlehem celebrated its millennial Christmas Eve tonight and the event was anything but silent and still. Firecrackers, gospel choirs, sirens, church bells, car horns and even a muezzin's call to prayer from the mosque on Manger Square saw to that.

But for the town's Christians, and for several thousand pilgrims who braved daunting traffic, police checkpoints and a heavy press of security to get here, Christmas in Bethlehem was still as holy as it gets.

"I had to be here," said Susan Okafor, 36, a British nurse who knelt down below the altar of the Church of the Nativity and on hands and knees kissed the stone floor at the precise spot where Jesus is said to have been born. "I just couldn't resist it for the millennium."

At Shepherds' Fields, thousands gathered to pray where they believe the angels announced Jesus's birth. At Manger Square, an even greater multitude heard choirs and speeches. American gospel groups serenaded the crowds downtown, and patriarchs and prime ministers paid their respects to the town of Jesus's birth and the Palestinian officials who have run it since taking over from Israeli occupation authorities in 1995.

At a maternity ward on the edge of town, a baby was born to a Muslim mother, who experienced an ecumenical thrill at the timing of her delivery.

"Today is a day of happiness--it's a holy day," said Intisar Lahham, 27, smiling weakly from her hospital bed shortly after giving birth to her first child, a boy named Hilal. "I feel that the whole world is celebrating with me."

Said Nick Roosevelt, 50, a teacher and former corporate executive from Connecticut: "For me, it is spiritual to be here. This journey started with a great deal of praying before I came."

Christmas Eve is special every year in Bethlehem, but this year it was different.

The town has remained mainly a scruffy little place, full of falafel stands, souvenir shops and stores selling electronics. Chalky dust billows in clouds along its winding alleys. But these days the town has been made to shine, its narrow streets recently repaved, freshly swept and strung with green light bulbs and flashing colored stars in anticipation of millennium visitors.

Around Manger Square tonight, the rooftops were fringed by news photographers and television camera crews. Below, a building that once housed an Israeli police station has been remodeled as a peace center and, for Christmas Eve, transformed into a communications headquarters for the world's media.

At noon, several hundred Muslims said Friday prayers on Manger Square, kneeling toward Mecca on freshly laid paving stones as Christian pilgrims looked on quietly.

After months of preparation, though, town officials expressed worry that the windfall of visitors they had hoped for had failed to materialize. They blamed news reports about unrest and the possibility of millennium violence for causing travelers to cancel their bookings. Especially damaging, they said, was a recent State Department warning that terrorists may be planning to target Americans overseas.

"The atmosphere is good but the number of tourists is not enough," said Hanna Nasser, Bethlehem's mayor.

Jonathan King, an Australian tour leader, said he had expected to be shepherding a group of 80 of his countrymen through Bethlehem today. In the event, all but 10 canceled becaused of what they read and heard in the news.

"People just started canceling," he said, disgusted at the timidity of his countrymen. "I mean, you have to be gutless not to come here as a Christian on the millennium."

The town, under the control of Yasser Arafat's Palestinian Authority, has had nearly $100 million in face lifts in preparation for 21st century. The number of hotel rooms is set nearly to double and streets have been widened and extended and sewer lines installed. Downtown streets and squares that were once parking lots are now pedestrian malls.

For Arafat, Bethlehem is a chance to show the world that the Palestinians are able custodians of Christian holy places as he prepares to declare the birth of an independent Palestinian state next year.

Playing the starring role in a drama largely of his own creation, Arafat, a Muslim, attended the noon prayers on Manger Square. Then, 12 hours later, he appeared at the Roman Catholic midnight Mass at St. Catherine's, adjoining the Church of Nativity on Manger Square. The Mass was celebrated by the Rev. Michel Sabbah, a Palestinian whose title, Latin Patriarch of Jerusalem, makes him the equivalent of an archbishop.

The Palestinian leader also played host to a handful of international dignitaries, including Italian Prime Minister Massimo D'Alema and Spanish Prime Minister Jose Maria Aznar. They arrived amid heavy security that made movement around town increasingly difficult as the day wore on.

Bethlehem, a 15-minute drive south of Jerusalem, was once an overwhelmingly Arab Christian town. But many inhabitants left or fled following the birth of Israel in 1948 and the Israeli conquest of the West Bank in 1967. Many of them settled in Latin America, never to return home. Gradually the town's demographic balance shifted and today just a third of Bethlehem's 27,000 residents are Christian.

Nearly all the rest are Muslims, as are an additional 27,000 Palestinians who fled their homes in present-day Israel and now live in three refugee camps near the edge of town.

That seemed of little significance to the Western pilgrims who came here, many of whom seemed not to know that Bethlehem is a Palestinian town.

"Something called us to come," said Jean Ghazal, 67, an English woman, who noticed an advertisement for cheap flights to the Holy Land a few weeks ago and suddenly found herself here for the first time. "It just happened--we didn't plan it."

CAPTION: Pilgrims at Saint Peter's Square in Rome listen to Mass marking celebration of the millennial anniversary of Jesus's birth. Story, Page A26.

CAPTION: Midnight Mass is celebrated at the Church of the Nativity on the site where Jesus was born in Bethlehem. Despite thousands of pilgrims, town officials were disappointed with the turnout.