But while under normal circumstances it would appear to be an entirely innocent gesture, the move is certain to spark fury in Pyongyang.
South Korea dismantled a 43-year-old frontline Christmas tree-shaped tower in October because of safety worries.
The structure stoked tensions because officially atheist Pyongyang saw it as propaganda warfare.
The tower, which was located about 3 kilometers (1.9 miles) from the border, sat on a peak high enough for North Koreans living in border towns to see it.
On Tuesday, Seoul's Defense Ministry said it approved the setting up and lighting of a new Christmas tree in the same area for two weeks starting from 23 December to pray for peace.
Ministry spokesman Kim Min-seok said the approval was aimed at guaranteeing religious freedom.
The Seoul-based Christian Council of Korea confirmed the announcement, saying it will take down the 9-meter (30-feet) tree after the two weeks are finished.
Tension on the Korean Peninsula remains high since troops from the rival Koreas exchanged gunfire along their heavily armed border twice in October.
Earlier, there were signs of softening animosities after a high-powered North Korean delegation visited South Korea and agreed to revive senior-level talks.
The talks have yet to be held due to disputes over South Korean propaganda leaflets floated to the North by balloon.
The Korean Peninsula is in a technical state of war because the 1950-53 Korean War ended with an armistice, not a peace treaty.