The pontiff also had special words for Africa and the victims of tragic humanitarian disasters there such as the one in Darfur, in Sudan, reports CBS News correspondent Sabina Castelfranco (audio), and he called for the settlement of "dangerous disputes" in Asia and continued dialogue on the Korean peninsula.
It was Benedict's first Christmas "Urbi et Orbi" message — Latin for "to the city and to the world" — and he continued the tradition of Pope John Paul II by using the speech to review conditions around the world and lament the violence and poverty that afflict so many.
The message, delivered from the same velvet-draped balcony where Benedict uttered his first public words as pope, came hours after he celebrated his first Midnight Mass inside St. Peter's, in which he prayed for peace in the Holy Land.
A screaming and cheering crowd of thousands, headed by a military marching band and lines of Swiss Guards, braved a chilly drizzle to hear Benedict's message. Groups of pilgrims and tourists cheered and clapped when he wished them a Merry Christmas in more than two dozen languages — another tradition of John Paul's.
Wearing shimmering gold vestments and a golden miter, Benedict told the crowd that God's love strengthened all of humanity.
"A united humanity will be able to confront the troubling problems of the present time: from the menace of terrorism to the humiliating poverty in which millions of human beings live, from the proliferation of weapons to the pandemics and the environmental destruction which threatens the future of our planet," he said.
In the Middle East, he prayed that God "grant courage to people of good will in the Holy Land, in Iraq, in Lebanon, where signs of hope, which are not lacking, need to be confirmed by actions inspired by fairness and wisdom."
He singled out the Darfur conflict in Africa in urging strength for all those who are working for peace, development and the prevention of conflicts. He urged protection "of the most elementary rights of those experiencing tragic humanitarian crises, such as those in Darfur and in other regions of central Africa."
He asked God to favor continued dialogue on the Korean peninsula and elsewhere in Asia "so that by the settlement of dangerous disputes, consistent and peaceful conclusions can be reached in a spirit of friendship, conclusions with their peoples expectantly await."
And he called for the people of Latin America to live in peace and harmony.
At the start of his message, Benedict recalled the "immense" progress that had been made in recent centuries in technology and science.
"But the men and women in our technical age risk becoming victims of their own intellectual and technical achievements, ending up in spiritual barrenness and emptiness of heart," he said.
To combat such a void, he urged the faithful to open their minds and hearts to the birth of Christ.
"The modern age is often seen as an awakening of reason from its slumbers, humanity's enlightenment after an age of darkness," he said. "Yet without the light of Christ, the light of reason is not sufficient to enlighten humanity and the world."
Earlier, Benedict offered a Christmas prayer for peace in the Holy Land on Sunday and made a special mention of children, including the unborn, as he led hisin the splendor of St. Peter's Basilica.
Benedict's reference to the unborn in his homily was a clear reference to the Roman Catholic Church's opposition to abortion.
"God is so powerful that he can make himself vulnerable and come to us as a defenseless child, so that we can love him," Benedict said, referring to the birth of Jesus. He said that "something of the splendor" of Christmas "shines on every child, even on those still unborn." Reading his homily slowly, Benedict stressed the word "every" in his reference to children.
Benedict urged the world's Catholics to be beacons of peace, Castelfranco reports. He prayed for peace where there is conflict, for love where there is hatred and for light where darkness prevails.
He also had special words for the Holy Land during the midnight mass.
"On this night, when we look toward, let us pray in a special way for the birthplace of our Redeemer and for the men and women who live and suffer there," the pope said. "We wish to pray for peace in the Holy Land."
At the start of the service, a dozen children brought flowers up to the center altar, placing them near a statue depicting baby Jesus as a choir of adults and youths sang hymns.
Benedict wore gold-colored robes and blessed the crowd when he arrived, striding up the central aisle of the basilica, which was packed with pilgrims, tourists and Romans.
For the overflow, two giant screens were set up in St. Peter's Square, which was made festive with a 100-foot high Austrian fir, shimmering with decorations. In his homily, Benedict said a flame lit in Bethlehem accompanied the tree.
In his homily at midnight Mass, Benedict mentioned no other area of conflict on the globe other than the Holy Land.
Benedict ended his homily with this appeal to God: "Where there is conflict, give birth to peace. Where there is hatred, make love spring up! Where darkness prevails, let light shine."
Benedict has one other major public holiday appearance Monday, when he will deliver a noontime prayer. Then he breaks for a few days before presiding over an evening prayer service on New Year's Eve and celebrating Mass on New Year's Day, which the Catholic Church marks as World Peace Day.