Output levels increased at the fastest rate since June 2012, boosted by a return to growth in new business.
Employment rose over the month, contrasting with a slight decline UK wide.
Competitive pressures led businesses north of the border to reduce their output prices despite there being another substantial increase in average input costs.
The Bank of Scotland PMI read 51.2 in December, its highest mark for six months and indicative of moderate growth in private sector activity.
That compared with a reading of 50.3 in November and showed a better overall performance than for the total UK economy which saw stagnation in the final month of the year.
Behind the expansion in output north of the border was an accelerated rise in activity at service providers, with goods production decreasing further.
The level of new work placed with businesses operating in Scotland increased for the first time in six months in December.
Growth was the most marked since April, although still only modest relative to that registered in the first quarter of 2012. New export orders received by manufacturers meanwhile rose slightly, having fallen continuously on a monthly basis since June.
Scotland's labour market benefited from the improved trends in output and new orders in December, with businesses recording the fastest rate of job creation for five months.
Donald MacRae, chief economist at Bank of Scotland, said: "The PMI for December showed a welcome rise to its highest level for six months indicating a return to moderate growth in the Scottish economy.
“The increase in new business and the rise in employment are particularly encouraging. The pickup in new export orders should enable a return to growth in the manufacturing sector in the coming months.
“These results give hope that the Scottish economy has exited the recent period of slowdown and is entering 2013 in growth mode."
