Trevor Payne decorated his Cheslyn Hay home to raise funds for charity Young Minds, but wrote on Facebook saying he was told to turn it off by the police or be fined.
South Staffordshire Police also posted to Facebook asking people to avoid Kestrel Way due to a "large gathering" but the post has since been deleted.
A fundraising page was also set up by resident Joe Taylor to support the charity while the lights were off.
On the page he says: "Trevor a local resident from Cheslyn Hay, Staffordshire, decorates is home with thousands of Christmas lights every single year to raise money for charity.
"As well as raising thousands over the years, local families with children love to walk and visit the lights.
"2020 should have been no different except for Staffordshire Police deciding to intervene and threaten Trevor with a £10,000 fine if he did not turn the lights off, despite getting clearance beforehand due to Covid regulations.
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"As you can imagine this has angered local residents who are in full support of Trevor.
"Unfortunately until we can get this overturned with the local police I have set up this GoFundMe page to support Trevor's chosen charity to help out raising money of the loss of donations he’ll receive because of not being able to attract local residents.
"Please join me in making whatever donation you can as a local resident or a supporter of this cause. All moneys will go to the Young Minds charity."
The page was updated later saying that as of 9pm on Saturday the lights had been turned back on.
To view the page visit gofundme.com/f/help-save-christmas-lights-being-turned-off
Staffordshire Police has been asked to comment.