The bear - named Bernard - bursts into song when people walk past Loft CafÃ© in Shefford, Bedfordshire, where he has stood since 1 December.
An enforcement officer told owners Rob and Teresa Farndon there had been a complaint about "noise nuisance".
Central Bedfordshire Council said there was an "ongoing investigation".
Bernard sings snippets of five or six Christmas songs, including Andy Williams' It's The Most Wonderful Time of the Year, and is activated either by movement or by pressing a button.
He stood outside the cafe in North Bridge Street every day last December with no complaints and has been put away at 16:00 GMT every day so far this year.
The owners' son Connor Farndon said the complaint was "so petty".
"We put the bear outside for the kids to get them in the Christmas spirit and all the kids love him," he said.
"You can't even hear him over the traffic when it is standing stationary at the traffic lights outside.
"It's not the council's fault - they're just following up a complaint. It's the person who's complained who is ridiculous."
Mr Farndon said he thought the only thing the council could do was "tell us to take it away".
A council spokesman confirmed the premises had been visited "on a number of occasions" but that "Bernard has not been deemed a nuisance".
"We have written to both parties, explaining the situation as part of an ongoing investigation," he said.
"The council takes noise complaints seriously and has a legal obligation to fully investigate them, but we also want everyone in Central Bedfordshire to enjoy themselves over the Christmas period and would urge residents and business owners alike to be mindful of their neighbours when planning festivities."
A six-foot mechanical polar bear that dances and sings Christmas carols is being investigated after a council received a noise complaint.