I wrote the following in the comments of the last post, but then realized that I've basically cut-and-pasted this same reply so many times in various discussions over this topic, I should probably just make an official post out of it. So here you go.
It's practically a mantra in American Evangelical circles to say that Israel and the Church are the same with respect to salvation but separate with respect to function. Personally, I used to repeat this line regularly without giving it much thought. But eventually the question struck me: What exactly is the function, calling, or role of Israel? When I began to ask this question and seek a biblical answer, I slowly came to realize that my inherited dispensational categories didn't really fit the evidence of Scripture.
When I read the OT, it seems like the calling of Israel, quite simply, was to be the people of God for the world. The original calling which God gave to Abraham’s descendents in Genesis 12-17 was to be in some way the bearers of the solution to the problem of humanity’s fall in Genesis 1-3. His desire was that they would be a holy people, a special treasure, a kingdom of priests, a city on a hill, agents of his love and justice throughout the whole created order.
And I don't believe this has changed. God’s heart and plan for ethnic Israel remains the same as it always has—everything that the law and the prophets envisioned (e.g. Ex 19:5-6, Isa 42:1-9, Isa 49:3-7, Jer 31:31-37 or Ezek 36:26-27), and everything the NT insists is still open to them (Rom 9:4-5; 11:28-29).
But here’s the thing: all the OT passages cited above—where Israel is called things like “a special treasure above all people”, “a kingdom of priests”, “a holy nation”, “the elect one”, “a light to the Gentiles” and “[the Lord's] salvation to the ends of the earth”—all of these are applied to the renewed, Jew-plus-Gentile, family of God in Christ throughout the NT (e.g. Rom 4:13-16; Tit 2:14; 2 Pet 2:9-10; Rev 1:5-6).
Now, I’ve often heard those who argue for a distinct role for Israel appeal to Paul’s analogy of “one body with many members” in 1 Corinthians 12. If Paul can say that individual’s in Christ’s body all have different roles and callings, so it is argued, then why would it be wrong to say that Jewish believers have a distinct role from Gentile believers?
But this argument lacks definition. If what is meant by saying that Israel has a “distinct role” within the unity of the body of Christ is simply that they, as a particular ethnicity, have a gift mix that some other ethnicities don’t share to the same degree, 1 Corinthians 12 style—well in that case I would agree wholeheartedly. Jews have a knack for business, for instance, that most Hawaiians don’t share. That’s a gift we can track all the way back to the patriarchs in Genesis. But there’s a big difference between all of the various gifts that individuals, families, and whole ethnicities hold respectfully and the one great covenantal calling which incorporates each of those respective gifts, the call to be the people of God for the world. Distinction with regard to the former obviously stands true now as it ever has for ethnic Israel, but with regard to the latter it most emphatically does not.
And here lies the problem, in my estimation, with saying that Israel still holds a different role from Gentiles in Christ. Most who make this statement are seeking to maintain Israel’s separateness and singular covenantal role as seen in the OT, which was precisely the one great calling to be the people of God for the world, under the false assumption that such a separateness is coherent with the NT, which consistently declares that through Christ God has opened the door of the covenant for the Gentiles to come in and carry the same calling right along side their Jewish brethren. In other words, they’re not simply saying that Jews have a distinct role from Chinese who have a distinct role from Russians who have a distinct role from Americans, as if this were a holistic “diversity within unity” where everyone is special in their own way; rather they’re inescapably saying that Jews have a distinct role from everyone else, that they are, not as the redeemed but as Jews, a “peculiar treasure above all people” (Ex 19:5; Deut 14:2; cf., Tit 2:14).
And this is why I don’t see how a distinction can be made between God’s calling to Gentile believers and His calling to Israel as a nation and people; because God’s calling to Israel as a nation and people has always been precisely that they would be the light of the world, and his promises of exaltation and prosperity are for that vocational purpose, that his name might be declared in all the earth, that his people would partner with him in redeeming the earth (Isa 42; 49; Matt 5:14). And it was precisely this commission which Jesus gave to his followers after the resurrection (Matt 28:18-20).
As the people of God, the new community of Christ, we are, as Revelation 1:6 says, a “kingdom of priests”—meaning that all who participate in the kingdom share in God’s great mediatory task of reconciling everything in heaven and on earth in Christ. That is the one calling of Israel, now available to Jew and Gentile alike, for that is the one purpose of the covenants, spanning across the ages from the patriarchs to Christ to the new heavens and new earth.