Lady Lumley's School in Pickering, North Yorkshire, told pupils it would prohibit all festive activities as its true meaning had been lost.
Time to end the scandal of 'off-rolling' pupilsRE teacher Chris Paul said "an avalanche of commercialisation" had robbed the season of its meaning and it would be banned unless they could argue otherwise.
Mrs Paul had challenged pupils to consider the true meaning of Christmas and come up with answers to persuade her to change her mind.
But after hundreds of emails and letters "making a strong case" for jingling the bells and bringing back the baubles, the school has backed down.
Since throwing down the challenge, the school has received more than 500 emails and letters.
Special needs schools face perfect storm over fundingHead teacher Richard Bramley said: "Those students who really thought about the situation and challenged the decision appropriately created the change and brought back Christmas.
"I hope they and everyone else has a good Christmas."
Some parents criticised the school for going too far and "stealing Christmas".
He said the challenge was to make students consider the way in which society celebrates Christmas and think about the social problems that arise around this time.
"Students were asked to challenge the status quo - to ask 'why should we do things just because we have always done them?' and... to question whether non-religious people should celebrate a religious festival?"
Previously Mrs Paul told pupils there would be "no cards, no parties, no gifts and no Christmas tree."
"Christmas is a day celebrating the birth of Jesus and should be a time of good will to all, yet it can be a very stressful, expensive, argumentative and lonely time," she said.