Titled Merry Christmas, it's a bittersweet track that celebrates the season while remembering "the ones who have gone" in a painful year.
Complete with sleigh bells, ding-dongs and celestial choirs, it is one of three songs the stars wrote after Sir Elton pitched the idea last Christmas.
But the duo face stiff competition in the charts from Adele and LadBaby.
(Scroll down to read more about this year's contenders)
Sheeran already has one Christmas number one to his name with the Beyoncé duet, Perfect. Sir Elton's rollicking Step Into Christmas is also a festive staple, returning to the UK top 40 every year since 2017.
It was the continued success of that single that prompted the star to suggest a Christmas collaboration with Sheeran.
"He was so buzzed that Step Into Christmas gets a higher position each year," Sheeran told US chat show host Jimmy Fallon.