It had sold 39,611 units in the same month previous year, the company said in a statement.
M&M's domestic sales declined by 7 per cent to 34,460 units last month, as against 36,881 units a year earlier.
Sales of passenger vehicles including Scorpio, XUV 500, Xylo, Bolero and Verito stood at 17,311 units, compared to 16,436 units in December 2013, up 5 per cent.
Four-wheel commercial vehicle sales were down by 15 per cent to 12,194 units last month as against 14,399 units in the year-ago month, M&M said.
Exports were down 32 per cent to 1,868 units from 2,730 units in the same period a year earlier.
M&M chief executive automotive division and international operations, Pravin Shah said: "We are happy to have achieved a growth of 5 per cent for our passenger vehicle segment in December with 2014 being an immensely challenging year for the auto industry".
The industry which was showing early signs of recovery would be severely impacted by the withdrawal of the excise duty concessional rate which would affect overall business sentiment, as it will lead to an increase in vehicle prices, he added.
"At Mahindra we continue to remain optimistic going forward on the back of our new product launches during 2015," Mr Shah said.
Shares of M&M closed at Rs 1,236 apiece, up 0.12 per cent on the BSE today.