After about an hour, the gunmen tied to the ruling Fatah movement met with Bethlehem's governor and then walked out of the building. It was not immediately clear how the standoff was resolved.
Hundreds of Palestinian police and onlookers rushed to Manger Square after the gunmen appeared on the roof of city hall, pointing their weapons toward the crowd. Police sealed the streets leading to Manger Square.
The incident took place just four days before Christmas. The Church of the Nativity, one of Christianity's holiest shrines, stands over the grotto where tradition says Jesus was born.