The best entries will receive a cash prize and a framed certificate which will be presented during an official reception at Pembroke Town Hall.
There is no need to complete an entry form, but shops and businesses are requested to complete their window display by Monday, December 1, in order that judging can take place.
The difficult task of judging the entries will fall on Sean Powell and Rachel Rogers (head boy and head girl at Pembroke School) and Mrs. Dilys Hanmer MBE.
Also, shoppers will be asked to take part in a Christmas quiz whilst hunting for Christmas presents, with the chance to win prizes.
The results of both competitions will be announced during January.
Town Ccouncillor Keith Nicholas, who is also chair of Pembroke Chamber of Trade, said: "Hopefully, this competition is a way of attracting people into Pembroke, rather than travelling further afield to do their Christmas shopping. It's also an excellent way of brightening up the town and bringing the community together."