The Archdiocese of Washington in the US hopes a federal judge will force the Washington Metropolitan Area Transit Authority (WMATA) to reverse its decision to reject the commercial.
Kim Fiorentino, the Archdiocese of Washington's Chancellor and General Counsel, said: "We believe rejection of this ad to be a clear violation of fundamental free speech and a limitation on the exercise of our faith.
"We look forward to presenting our case to affirm the right of all to express such viewpoints in the public square."
Entitled 'Find the Perfect Gift', the advert depicts a star which led the Magi from the East to the baby Jesus in Bethlehem, and shepherds.
WMATA - which operates 1,500 buses throughout Washington DC, Maryland and Virginia - said it does not accept adverts which convey a political or religious message.
In a statement seen by Fox News, WMATA said: "In 2015, WMATA changed its advertising space to a nonpublic and prohibits issue-oriented advertising, including political, religious and advocacy advertising.
"The ad in question was declined because it is prohibited by WMATA's current advertising guidelines."
The advertisement promotes a website which explains why Christians celebrate Christmas and it helps people locate a Catholic mass service near them during the Christmas period.