South Korean officials gave permission for the 30-foot tree to be planted two miles from the border as a sign of peace in Advent.
But the North says it is an act of "despicable psychological warfare" and it will "escalate confrontation".
North Korea's state-run media, KCNA news agency, said the tree "will fan up the confrontation with the fellow countrymen in the north and bring a war disaster."
The Christian group will be allowed to display the tree just months after a larger Christian symbol was taken away from the area to ease tensions with the atheist state.
South Korean officials say permission was granted because the country is committed to religious freedom.