I designed this tree to use as scenery for my various knitted holiday figurines (Christmas, Easter, even Halloween).  It actually takes very little yarn to create - you could knit a forest with one skein of yarn!  If you would like to make this a Christmas decoration you could sew or glue on beads or sequins.
 
Tree is 5" high

Materials: Green worsted weight yarn
Size 8 knitting needles
Yarn needle
Polyfill stuffing
Craft glue (optional)

Gauge: 4sts = 1"

Base:cast on 10 sts
Row 1 (RS):Slip the 1st stitch purlwise, knit across.  Repeat this row until the piece measures 7".  Bind off.  With RS outside, whipstitch the row ends together.  Stuff.  Bring cast on edge & bind off edge together to form a ring & sew together. 

2nd Ring: Cast on 9sts.  Work row 1 until the piece measures 5 1/2".  Bind off.  Make up as for the base piece.

3rd Ring: Cast on 8sts.  Work row 1 until the piece measures 4 3/4". Bind off.  Make up as for the base piece.

4th Ring: Cast on 7sts. Work row 1 until the piece measures 3 1/2". Bind off.  Make up as for the base piece.

5th Ring: Cast on 6sts.  Work row 1 until the piece measures 2 3/4". Bind off.  Make up as for the base piece.

Top: Caston on 5sts.  Work in garter stitch for 7 rows (Knit each row)  Cut yarn leaving a long end.  With yarn needle weave the end through the remaining stitches, pull up tightly & secure together.  Stuff.  Weave caston tail ( or seperate length of yarn) through the cast on stitches,  pull up tightly & secure. 

Finishing: Weave in all ends.  Center the 2nd ring on the base piece & sew or glue in place.  Repeat with the 3rd, 4th, & 5th rings.  Place top piece in center of the 5th ring & sew or glue in place.