South Korea plans to let a Christian group reconstruct a hilltop tower near the inter-Korean border that’s used as an ad hoc Christmas tree and has been the subject of threats from North Korea.

Tuesday’s announcement from Seoul’s defense ministry comes weeks after the dismantling of a 1970’s steel tower that used to be decorated at the end of the year with lines of light bulbs and a cross on top. Built on Aegibong, a hill west of Seoul and just miles from North Korean town of Kaesong, the tower’s lights were visible from across...