Bosses at Thistles in Stirling, Scotland, flatly declined a request for the traditional display saying customers did not want to be "subjected to individual organisation's beliefs".
Even when an MP urged them to reconsider the ban, the shopping centre refused to budge on its decision.
Now critics of the centre have accused them of double standards by promoting a Christmas Market this year.
And the Scottish Catholic Church has urged Thistles to abandon its "Grinch-like" stance and reconsider.
The Church of Scotland claimed it was "a sad day for all of us".
Members of the Catholic Legion of St Mary's Association, took to Facebook to complain about the ban, under the heading: 'Bring back the nativity scene to the Thistles, Stirling'.
It stated: "Their reason being that despite heavily promoting Christmas for commercial gain, they 'pride themselves on religious neutrality' and so won't allow a nativity to be present any longer.
"While I understand that no one wants religious or political evangelists in a shopping centre, the request was simply to have a nativity, which would be manned and anyone approaching could ask about it."
A member of the association, Margaret Patterson, complained to her local MP, Stephen Kerr, who wrote to Thistles asking them to reconsider.
A spokeswoman from the Church of Scotland added: "We find it very disappointing that the true meaning of Christmas has been completely lost here.
"When a shopping centre can focus purely on commercialism to the exclusion of the reason for the celebration of Christmas it is a sad day for all of us."
MP Mr Kerr said: "I am disappointed that a rather rigid view seems to have been taken regarding the existing policy.
"Surely there is room for a simple display that may be of interest to people. I would hope that an application from any faith group would be considered on its own merits."
A spokeswoman from the Thistles Centre said: "While we are sympathetic with Legion of St Mary's request to have a nativity scene in Thistles Shopping Centre, we are unfortunately unable to accommodate it.
"As is common amongst shopping centres, our policy is to support our local community in celebrating the festive season without affiliating with any specific religions or beliefs."
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