Bartella, once home to thousands of Assyrian Christians, emptied in August 2014 when it fell to Daesh's blitz across large parts of Iraq and neighboring Syria. Iraqi forces took it back in the first few days of the offensive that started in October.
"It is a mix of sadness and happiness," said Bishop Mussa Shemali before a Christmas eve ceremony at Mar Shimoni church, which has been badly damaged, with crosses taken down and statues of saints defaced, Reuters reported.
"We are sad to see what has been done to our holiest places by our own countrymen, but at the same time we are happy to celebrate the first mass in two years."
The region of Nineveh is one of the most ancient settlements of Christianity, going back nearly 2,000 years.
The front line in the battle to retake Mosul - Daesh's last major stronghold in Iraq, has moved a few kilometers to the west, into eastern districts where the terrorists are dug in among civilians, fighting off the advance of elite Iraqi units with suicide car bombs, mortars and snipers.