What does 1 Peter 2:5 mean?

In the previous verse, Peter identified Jesus, the Lord, as the living stone. He is living because He was dead and now is alive. We will see in the next few verses that He is called the stone because He is the cornerstone of the house of God. Now Peter includes believers in the metaphor. Like Jesus, Christians are living. We once were dead spiritually, but have been made alive by God's grace through our faith in Christ (Ephesians 2:5). We may die physically, but our resurrection is already secured by God's promise (1 Peter 1:3–5).

Christians are stones, as well, set aside for a specific project. God is currently building us into a spiritual house, a dwelling place for Himself. In this new temple—made out of the people of God—each of us also serve as priests.

Under the Old Testament Law, of course, the people would come to the temple where the priests would represent them to God. Now, Peter writes, God's people in Christ are the temple. We are also the priests. All of the barriers between God and us have been removed. We come to our loving Father boldly, needing no other mediator but Jesus Himself (Hebrews 4:16).

Also under the Law, the people would have brought sacrifices to the temple where the priests would have killed the animals and offered them to God on behalf of the people. Now, in Christ, the people are the temple; we are the priests; and we are also the sacrifices offered to God.

However, as Paul writes in Romans 12:1, we are living sacrifices. With our sin already forgiven through Jesus' death, no more death or blood is required. Instead, we offer our living bodies—every part of ourselves—as acceptable spiritual sacrifices to be used by God for His purposes.