He also condemned the huge divide between the world's rich and poor, saying Jesus's birth in poverty in a stable should make everyone reflect on the meaning of life.
He spoke out while leading a service in St Peter's Basilica in the Vatican for the traditional Christmas Eve Mass.
It is the 82-year-old's sixth Christmas as head of the Roman Catholic Church.
In his homily, Pope Francis said the birth of Christ pointed to a new way to live "not by devouring and hoarding, but by sharing and giving".
He continued: "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?
"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."
On Christmas Day on Tuesday, the Pope will deliver his "Urbi et Orbi" (to the city and the world) message from the balcony of St Peter's.
Francis, the first Pope from Latin America, has made highlighting the plight of the poor a key theme of his papacy.
During Christmas Day Mass in 2016 he warned that the true meaning of Christmas was being drowned out by materialism.
His predecessor Pope Benedict made a similar point in 2011.