The Independent Parliamentary Standards Authority (Ipsa) announced MPs can this year claim for food, decorations and non-alcoholic drinks.
But MPs on all sides have rejected the guidance, with one calling it "bonkers" amid a cost of living crisis.
Ipsa said holding a "modest gathering" for staff was "entirely appropriate".
But a spokesman for Prime Minister Rishi Sunak said he wouldn't be claiming for a party, and that MPs would have to "justify all spending to their constituents".
Labour MPs have been told it would "clearly be inappropriate" for them to claim for Christmas parties at a time of rising living costs.
John Cryer, chair of the parliamentary Labour Party, said he would be writing to Ipsa to ask them to reconsider their guidance.
Labour frontbencher Jess Phillips said: "The guidance wasn't made by MPs and yet we will be pilloried for it.
"I think it's really irresponsible to issue this guidance as if MPs have been clamouring for it when I've literally never heard anyone do that."
Liberal Democrat Chief Whip Wendy Chamberlain said none of her party's MPs would be claiming, adding "in the middle of a cost of living crisis this is tone deaf from Ipsa".
Conservative Former Brexit secretary David Davis called the rules "bonkers" and said Ipsa had "missed the mood of the age".
In a statement, Ipsa defended its approach, saying MPs' staff worked in a "challenging" environment and often had to deal with "distressing" casework from constituents.
"As employers, it is entirely appropriate that MPs should, if they see fit, reward their staff with a modest gathering at Christmas," the statement added.
"We are clear that alcohol is not included, that any event must represent value for money, is subject to publication for transparency and must not be party political in nature. It must be funded within existing budgets."
"To suggest that there is anything inappropriate in this is simply incorrect."
The organisation added that it had produced the guidance in response to requests from MPs for clarification on its expenses policy.
The authority - which was set up in the wake of the 2009 MPs' expenses scandal - is funded by the Treasury, which in turn raises most of its funds through taxes.
In its update, the body said MPs would be able to claim for "festive office events" for staff - but "value for money should be considered and all claims will be published in the usual manner".
Ipsa added that all claims "should represent value for money, especially in the current economic climate". Claims have to be parliamentary in nature and should not be party-political.
The authority said it would also approve claims of money spent on sending cards to local residents.
But MPs were explicitly told they cannot use their expenses for a festive or new year calendar, decorations outside their constituency offices, or spend taxpayers' money on alcohol.
Any Christmas cards claimed for must not be sent to "large groups or all constituents as there is a risk this may not represent value for money and could be considered self-promotional".