0100 GMT November 17, 2019
Kindness can heal society's divisions, she said at St. Paul's Cathedral.
The leader of Roman Catholics in England and Wales, Cardinal Vincent Nicholls, used his homily to thank volunteers working to help the needy.
Both leaders acknowledged that many people faced challenging times and that society had become more divided.
Speaking before delivering her first Christmas midnight service since becoming the first woman Bishop of London, Bishop Mullally told the BBC the UK was facing ‘a lot of turbulence’.
"Debates in politics around the EU referendum have created division," she said.
"My belief is that diversity creates strong community; division weakens it."
But she said the Church had been working across generations and social groups and that churches working together could help in "breaking down barriers... so we create stable communities".
"The Church needs to speak confidently about faith in Jesus Christ but it also needs to reflect the compassion we see in God and Jesus which is why, not just in London but right across the country, churches are involved in social action projects," said Bishop Mullally.
"[There are] something like 33,000 social action projects across the Church of England; people setting up food banks, credit unions, dementia cafes and night shelters demonstrating the love of God."
In his homily, the Archbishop of Westminster, Cardinal Nicholls, pointed to "difficult times, times of uncertainty and an absence of consensus".
But he also spoke of ‘countless acts of kindness’, saying, "Our society is full of generosity and compassion, although we do not shout about it."
"In our parishes, for example, there are over 130 projects responding to food poverty and homelessness," he told worshippers at Westminster Cathedral.
"So many of our schools provide breakfasts and vouchers for the most needy. Volunteers constantly come forward... If, in the coming year, hardship increases, then we are ready to help in every way we can."
'A lonely time'
Around the country, bishops used Christmas messages to urge people to come together.
Graham Usher, the Bishop of Dudley, said, "Our current political debates... put up barriers between those who voted in different ways.
"Our country needs, more than ever, to seek grace and generosity in our political conversation so that there are not winners and losers, just the flourishing of all."
Bishop of Bath and Wells Peter Hancock pointed out that Christmas is "a joyful time but for many people it's a tough time and lonely time too".
Meanwhile, Bishop of Taunton Ruth Worsley wondered "if this Christmas we might think about how we can offer some hope to other families who might be struggling?"