A Christian group had made the request to put the tree two miles from North Korea even though Kim Jong-un's regime is strictly atheist.
The Defence Ministry gave the final approval saying it will go up on December 23 for two weeks.
Seoul's Christian Council of Korea said the tree would be a symbol to encourage everyone to use Christmas to pray for peace.
It comes just weeks after a Christmas tree shaped tower was removed from the border after the North said it was propaganda warfare.
The two nations are technically still at war. An armistice was signed in 1953 but there has never been a peace treaty.