In a previous blogpost I wrote of Peter’s argument that Jesus was God’s Chosen One or his Elect One, saying Jesus was the Living Stone (1Peter 2:4) and the chief Cornerstone (1Peter 2:6). The point is that the master-builder doesn’t end with a foundation stone; he begins with it. It is the stone upon which the rest of the structure rests. It is logical, therefore, to assume that Peter intends for us to see that God was beginning a new work in Jesus. Moses even predicted that a Prophet would come, a Prophet who would be like him (Deuteronomy 18:15-19). A covenant between man and God was initiated through Moses. Therefore, a new covenant between man and God (cf. Jeremiah 31:31) would be initiated through the Prophet who was to come. A new foundation would be laid and a new building would be raised. It is to this idea that Peter writes to the Jews of the Diaspora in Asia Minor.
Peter describes his readers in four terms at 1Peter 2:9, saying they are: (1) a chosen generation, (2) a royal priesthood, (3) a holy nation and (4) a peculiar people. These terms, every one of them, were used to describe Israel, the nation, the descendants of Abraham, Isaac and Jacob. Nevertheless, Peter uses them differently in his epistle. They are used to describe a new work of God and are applied to those who have trusted in Christ, the Living Stone and chief Cornerstone of that new work.
Instead of the nation, God has chosen a seed to serve the Lord (Isaiah 53:10; Hebrews 2:13), and this seed is counted as a generation in his eyes (Psalm 22:30). These are the children of God who have trusted in Christ. They are neither Jew nor gentile, male or female, slave or master, but are Christ’s and, therefore, Abraham’s seed and heirs to the promises (Galatians 3:26-29).
Since the Levitical priesthood was rejected (Malachi 2:1-3), and God promised that a righteous Priest would come (cf. 1Samuel 2:27-30, 35), it stands to reason that a new priesthood would serve God, and, therefore, a new work would be required. Jesus claimed that he was anointed to give joy to those who mourn over the condition of Israel (Isaiah 61:1-3; Luke 4:18-19). Out of these the Lord would take instead of the priest and Levites (Isaiah 66:21) and make them a Kingdom of Priests to God (Isaiah 61:6).
Israel was to be the holy nation of God (Exodus 19:6). That is, they were to be different from the gentiles or the nations around them. Nevertheless, they as much as rejected God as their King when they wanted to be like the other nations (1Samuel 8:5; cf. 1Samuel 8:7). This is also what the Jewish nation had done in Peter’s day by rejecting Jesus as their Messiah, but, concerning those who received him as their Lord or Messiah (King), these became a holy nation (Isaiah 26:1-5; cf. John 1:10-13), a people different from those around them.
Finally, God chose Israel as his peculiar people to show forth his praise through good works (1Peter 2:9; cf. Isaiah 43:21), but they didn’t do that (Isaiah 43:22-24). God had placed his people between two great empires whose trade went through his people’s land, yet the nations were never shown what a praiseworthy God Israel’s God was. Since God dispersed the Jews throughout the nations until modern times, it stands to reason that a new work was established to do what Israel didn’t do. God chose those who have received Jesus as their Messiah and King (John 1:12-13), who would, indeed, show forth in their behavior the virtue of the Lord whom they serve (1Peter 2:9), being ‘zealous for good works’ (Titus 2:14; cf. Ephesians 1:13-14).
We are enabled to become these things, not because we are better than the Jews, but because we are “called out of darkness and into his marvelous light!” (1Peter 2:9). God has transported us from the power (authority) of darkness into the Kingdom (authority) of his Son (Colossians 1:13). The glory of the Lord had risen upon Peter’s readers (Isaiah 60:1-2), and the light of God has shined in their hearts, giving them (and gentiles worshiping with them) knowledge of God through their knowing Jesus (2Corinthians 4:4-6; cf. Hebrews 1:1-3), and enabling them to not only reprove evil, but practice goodness, righteousness and truth (Ephesians 5:8-11).
 See Deuteronomy 10:15; Isaiah 41:8 (chosen generation); Exodus 19:5-6 (kings and priests); Exodus 19:6 (holy nation); Deuteronomy 7:6; 26:18-19 (peculiar people).