On Christmas Eve, thousands of Palestinian Christians and their co-religionists from all over the world will congregate on Bethlehem’s Manger Square beneath a giant Christmas tree to celebrate the birth of Christ at the very place tradition holds he was born. For many of the Palestinian worshippers at least, this is a bittersweet moment, the joy of marking the most important date in the Christian calendar offset by the siege-like atmosphere – an eight-metre-high wall around the town, chainlink fences and mushrooming Israeli settlements – in which it takes place.

Few of us know much about the “little town of Bethlehem” beyond the Christmas carol beloved by English-speaking Christians and the fact that it is the birthplace of Christ. Fewer still, I suspect, realise that Bethlehem is under unprecedented threat from Israel. Hemmed in by 42 settlements, which are considered illegal under international law but which Israel regards as legitimate suburbs of Jerusalem, it has become, in Nicholas Blincoe’s melancholy closing verdict, “an open-air prison”.

Blincoe, it should be said at the outset, is not your average historian. In fact, he’s not an historian at all. A screenwriter, novelist and playwright, he is married to the Palestinian film-maker and activist Leila Sansour, whose family comes from Bethlehem. One of his documentary credits is the 2003 film Jeremy Hardy vs the Israeli Army, directed by his wife. All of which should give you a fairly clear idea of where he is coming from.

Just as the author is no conventional historian or biographer, Bethlehem is no straightforward account of this extraordinary little town. Part history, part travelogue and memoir, it reads like an extended love letter to a place on the brink. While the chronology holds his narrative more or less together as we move from stone age settlement to contemporary Israeli settlements via Christian Rome, Byzantium, the era of Islamic conquest and the Crusaders, Mamluks, Ottomans and the British, he gives himself free rein to share memories, travels, interviews and assorted experiences along the way in a highly discursive, frequently amusing, often tragic but always accessible history.

A mosaic of Christ’s birth in Bethlehem. Photograph: Alamy Stock Photo

Settlement around Bethlehem dates back something like 11,000 years, but the town itself is comparatively recent, founded around 200 years before Christ. Its location in a water-rich area on the edge of the desert six miles from Jerusalem has long been its great advantage and simultaneously its fatal weakness. Since Jerusalem has always been dependent on its diminutive neighbour for its water supply, originally via an ancient aqueduct, since antiquity Bethlehem has been the key to controlling the larger city, as waves of incomers understood – from the Seleucids in the fourth century BC to the British and Israelis in the 20th.

Its earliest trade was in olive oil, hauled west across the desert by pack animals to the Nile. The terraced valleys around the town today, full of almonds, apricots, figs and grapes, recall Bethlehem’s position on the ancient spice route. By the middle ages, Bethlehem was prized by Venetian traders for its high-quality soap. This brought a measure of prosperity to the little town in addition to income generated by the pilgrim trade, centred around the Church of the Nativity – originally consecrated by Constantine the Great and his mother Helena in 327, rebuilt in 565 by Justinian after its destruction in the sixth-century Samaritan revolts.

Humour is one way to undercut the pervasive sense of a world closing in on Bethlehem. Writing about the Philistines and their sarcophagi decorated with meaningless Egyptian hieroglyphics simply for effect, Blincoe likens them to “basketball players who misspell the words tattooed on their bodies”. Discussing the recent Italian-led restoration of the Church of the Nativity, whose crypt marks the site of Christ’s birth, he confesses to alarm on watching a team ripping out ancient cedarwood beams with a crowbar. “Much like laws and sausages, I guess it is better not to know how a sixth-century church is restored.”

While Jerusalem has long been the most contested city on Earth, the land around Bethlehem is no less fraught. Territory and its control here matters more than perhaps anywhere else on the planet. Blincoe cites the advisory opinion of the international court of justice in 2004 on Israel’s profoundly controversial wall, which the court argued was designed “to create a ‘fait accompli’ on the ground that could well become permanent … tantamount to de facto annexation”.

At the flat-topped hill of Herodion – known in Arabic as Jabal al-Fureidis, the Hill of Paradise and once home to the Empress Eudocia from her arrival in Bethlehem in 444 – Blincoe is angered by the site’s recent “tenuous” reinterpretation and reconstruction by the late Israeli archaeologist Ehud Netzer.

For many Palestinian worshippers, the joy of Christmas is offset by the siege-like atmosphere in which it takes place

“The dig seemed like a metaphor for Israel: a tough-guy reading of Jewish history that obscured every other story or, worse, erased it entirely,” he writes. “At Herodion, Netzer had literally built over Paradise.”

If the Israelis are Blincoe’s main target, Britain’s colonial rule in Palestine is also in the line of fire. He argues that “what stands out about British rule is its sheer destructive nature, both to the landscape and the people”. It was the British who shut down the millennia-old market in Manger Square, forcibly moving the livestock traders to the foot of Wadi Maali and displacing the stallholders on to the ridge, where three blocks from the oldest surviving part of Bethlehem were pulled down to accommodate them.

Blincoe is at his most bleak on the prospects for peace. Since Israeli rejectionists, for whom land can never be negotiated away, constitute part of the political mainstream, “no Israeli leader will ever make a deal with the Palestinians”. He does not mention rejectionists on the Palestinian side. Nor, he reminds us, should the world see Israeli settlements as a purely ideological movement.

As the Israeli historian and one–time deputy mayor of Jerusalem Meron Benvenisti puts it, the settlements are a “commercial real estate project that conscripts Zionist rhetoric for profit”. The story of Jesus and the moneychangers somehow comes to mind.

• Bethlehem: Biography of a Town is published by Constable. To order a copy for £17 (RRP £20) go to bookshop.theguardian.com or call 0330 333 6846. Free UK p&p over £10, online orders only. Phone orders min p&p of £1.99.