St James's Palace has released a statement confirming that the couple will spend the day "privately with the Middleton family" at their home in Bucklebury, Berkshre.
Traditionally the royal family spend the day at a gathering at Sandringham, Norfolk, which includes the Queen and other royals. The royal family normally make a public appearance on Christmas Day for the morning service at Sandringham church.
St James's Palace said that the decision was taken "with the approval of the Queen and the Duke of Edinburgh".
"The Duke and Duchess of Cambridge will spend Christmas Day privately with the Middleton family," a spokesperson for the couple confirmed.
A royal source told The Daily Telegraph that the couple "plan to attend Sandringham at some point in the Christmas period".
[The Duchess of Cambridge and David Beckham present the BBC Sports Personality of the Year Award to Bradley Wiggins]
The couple spent last year's Christmas with the Queen and Sandringham, but it is believed that the Duchess of Cambridge, who is expecting her first child with Prince William, wishes to spend her last year before she is a mother with her family.
"The couple's decision to spend Christmas with the Middletons at Bucklebury just seemed to make sense, given the circumstances," a second insider explained.
The duchess had been hospitalised earlier this month with severe morning sickness, and has cancelled several public engagements due to her illness.
Photo gallery - A year in the life of the Duchess of Cambridge: