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Read Introduction to 1 Peter


“But you are a chosen generation, a royal priesthood, a holy nation, His own special people, that you may proclaim the praises of Him who called you out of darkness into His marvelous light.”

are a chosen generation
Now Peter talks about the first of four privileges for the believer. These four privileges orient the believer to God’s prerogatives for him. Each description describes positional truth. 
All four privileges relate to our status with Christ. Therefore, Christians are left without any illusions about ourselves. These four phrases have nothing to do with how we feel; they have to do with what God did for us. Therefore, Christianity is grace-oriented. Christianity is grace. Grace always depends on who and what God is. It never depends on us. 
“Chosen generation” is the first of a four-fold description of a believer. In contrast to those destined for destruction, Christians are a chosen race or generation. God uses the phrase “chosen people” for both Israel and the church. God told Moses at Sinai to tell Israel, “You will be for Me a kingdom of priests and a holy nation” (Ex. 19:6). Here are some of the New Testament references to election.
Matthew 22:14, “For many are called, but few are chosen.”
John 15:16, “You did not choose Me, but I chose you and appointed you that you should go and bear fruit, and that your fruit should remain, that whatever you ask the Father in My name He may give you.”
John 15:19, “If you were of the world, the world would love its own. Yet because you are not of the world, but I chose you out of the world, therefore the world hates you.
2 Thes. 2:13, “But we are bound to give thanks to God always for you, brethren beloved by the Lord, because God from the beginning chose you for salvation through sanctification by the Spirit and belief in the truth, 14to which He called you by our gospel, for the obtaining of the glory of our Lord Jesus Christ.”
Rev 17:14, “These will make war with the Lamb, and the Lamb will overcome them, for He is Lord of lords and King of kings; and those who are with Him are called, chosen, and faithful.”
Eph 1:4, “Just as He chose us in Him before the foundation of the world, that we should be holy and without blame before Him in love.”
“Generation” is a class of people who have a common descent and life. Christians are a spiritual race. It is not simply those living in the first century. The church is a race based on spiritual birth (regeneration). We enter this generation by a spiritual birth. We enter into union with Jesus Christ forever. 
Christians carry corporate titles. All true Christians are chosen groups diverse from those without Christ. 
“Are” is in italic, making it emphatic by the absence of a verb. “You … a chosen generation.”
At salvation, we enter into the same position that Jesus has before God forever. 
Christianity is a relationship, not a religion. Religion is an attempt to gain the approbation of God. Christianity means that God is satisfied with us no matter what, because of Christ. Our prerogatives are entirely accomplished by God through Christ, apart from human work. It is entirely the work of God. It is the grace of God.