An Indiana town of less than 3,000 people is engaged in a battle against a leading atheist organisation over their annual Nativity display.

Brookville has presented a Nativity scene for Christmas for the last 50 years, but the Freedom From Religion Foundation (FFRF) considers the display a violation of the separation of church and state.

The scene sits on the Franklin County Courthouse square, and features a manger display. There are statues of Mary and Jesus, lambs, a ram, donkey, camel, and calf, the Three Wise Men, shepherds, and baby Jesus.

Brookville resident Wayne Monroe said he doesn't know what the fuss is about.

"If people don't like the look of it I think they can look the other way, or don't look at all," he told WLWT. "It's been a tradition here for many, many years and I hope it's for many more years. I think we deserve the right to put up what the community wants and I don't think anybody else should tell us what to do.

"I think it's going to take a lot more that some outfit from Wisconsin to have it removed," he continued.

Resident Ron Anderson said the town has a right to celebrate Jesus' birth.

"I don't understand why people want to take away our love of Christ from us," he admitted. "It's his birthday, we need to celebrate that and remember that.

"When you start taking (rights) away we lose track of who we are as American citizens."

The FFRF has been mailing complaint letters regarding the Nativity scene to County commissioners for years, but the letters were ignored.

Commissioner Scott McDonough said the FFRF is misinterpreting the Constitution.

"They use the misconceptions about the separation of church and state to make everyone afraid of getting into the middle of a lawsuit, when the Constitution does protect you," he told FOX & Friends on Thursday.

He also encouraged others on the receiving end of FFRF threats to stand firm in their faith.

"Stop letting them bully you," he insisted.