Francis, 82, marking the sixth Christmas of his papacy, led a solemn service for nearly 10,000 people in St Peter's Basilica for his traditional Christmas Eve Mass.
Security has been tight around the Vatican and many other tourist areas in Rome for the Christmas season.
Last week police in southern Italy arrested a Somali man suspected of having been a member of Islamic State and who had threatened to bomb churches in Italy, including St. Peter's.
"... Let us ask ourselves: Do I really need all these material objects and complicated recipes for living? Can I manage without all these unnecessary extras and live a life of greater simplicity?" Francis said.
"In our day, for many people, life's meaning is found in possessing, in having an excess of material objects. An insatiable greed marks all human history, even today, when, paradoxically, a few dine luxuriantly while all too many go without the daily bread needed to survive," he said.
Francis, the first pope from Latin America, has made defending the poor a hallmark of his papacy.
The Catholic charity Caritas estimated late last year that there are more than 16,000 homeless in Rome and their number congregating near the Vatican has grown visibly in recent years, especially at night when they cluster under arcades to sleep.
Monday night's Christmas Eve papal Mass was the first held with a new, energy-saving lighting system for the largest church in Christendom. It employs 100,000 LEDs (light emitting diodes), using only 10 percent of the energy of the previous system.
On Christmas Day on Tuesday, Francis will deliver his twice-yearly "Urbi et Orbi" (to the city and the world) message from the central balcony of St Peter's Basilica, the same balcony where he first appeared after his election on Mar 13, 2013.