Dispensationalism (hereafter DT) has several primary tenets. Ryrie wrote that the sine qua non of DT are as follows:
1. Doxological view of history. This is the view that all of human history from creation to consummation is ultimately for God’s glory. With this, all Christians agree.
2. Literalistic hermeneutic. Most Christians would agree in principle with this concept, that scripture ought to be understood as it presents itself. DT maintains in particular that the Old Testament prophecies concerning the nation of Israel must be understood in a literal fashion, i.e., not spiritualized to mean something other than what they appear to say on the surface. By this they mean that they must be fulfilled by ethnic, national Israel.
3. Ongoing distinction between two peoples of God: Israel and the Church. It is this tenet that truly separates the system from the rest of Christianity. In order for the Old Testament prophecies concerning the nation of Israel to be fulfilled in a literal fashion (2.), there must be a clear distinction between Israel and the Church. This principle is actually what drove John Nelson Darby to conceptualize a Pre-Tribulational rapture for this reason: If the Church and Israel are both on the earth at the same time, God cannot fulfill promises to Israel without neglecting the Church and vice versa.
In contrast to Covenant Theology (hereafter CT), when the New Testament authors utilize an Old Testament prophecy and apply it to the Church, DT understands this to be secondary to the ultimate fulfillment, which must be literal.
Traditionally, DT maintains that the Church was a mystery in the Old Testament. By this, they mean that the Old Testament does not speak of the Church in any way and that no prophecy explicitly references the Church. The Church, in DT, obtains blessings because of God’s promise to Israel rather than (as CT holds) in fulfillment of them. So when a New Testament author utilizes an Old Testament prophecy and applies it to the Church, DT maintains that this cannot be the ultimate fulfillment of the prophecy but rather a spiritual application of it. The true fulfillment must be found in future Israel, according to DT.
The third of the sine qua non (according to Ryrie) is an ongoing distinction between the two peoples of God: the Church and Israel. This is both a serious theological problem and an entirely anachronistic concept. Before Darby in 1830, no one conceptualized this distinction. It had always been understood throughout Church history (and especially among the apostolic fathers) that the Church IS Israel.
At this point, it’s necessary to address the common accusation by DT that every other system is a form of “Replacement Theology.” By this, they mean that non-DT systems wrongly believe that Israel has been replaced as God’s chosen people by the Church. This is first and foremost a confusion of the opposition. We do not suggest that the Church has replaced Israel but rather that the Church is the ultimate fulfillment of Israel. I will elaborate on that more below. Second, this accusation of “Replacement Theology” is somewhat ironic since it is DT that believes Israel has been “set aside” and, essentially, replaced by the Church during the Church Age.
Now, when I say that the Church is the ultimate fulfillment of Israel, we have to understand how the term is used in the NT as well as the OT. The Greek term for church is ἐκκλησία (ekklesia). It is derived from terms meaning, lit., “called out ones,” and means “assembly” or “congregation.” In fact, in the Greek translation of the Old Testament (which was in use in the first century) called the Septuagint (LXX), the term ἐκκλησία is used to translate the Hebrew word which refers to the assembly of Israel. So the term “Church” is not even new to the New Testament, so it could not be a new concept either. What is strange about the New Testament Church is not that some other entity has become God’s chosen people but that God’s chosen people now includes Gentiles. Thus, Israel is not replaced but rather expanded from primarily those of Jewish descent to include people from every tribe, tongue, nation, and people.
Now a problem arises at this point which is addressed thoroughly in scripture because the issue came up in the early church: How can Gentiles be God’s people if they are not becoming Jews? Of course, by “becoming Jews” they would mean becoming circumcised, following the dietary restrictions, partaking in the festivals, adhering to the dress-code, participating in ceremonial washings, and taking part in the temple worship and sacrifice system. All these things were what, to the mind of the first century Jew, separated them from everyone else. It was a dividing wall of hostility between Jew and Gentile.
In Ephesians 1 through 2:10, Paul addresses the many blessings that were given to Israel—”the first to hope in Christ” (“Men of Israel” in Acts 2)—and then applies these blessings equally to the Gentiles—”you also when you heard the word of truth.” He continues this argument throughout the entire book, calling Jew and Gentile to be as one in Christ, explaining that this massive influx of Gentile believers was foretold long ago. The means by which this would occur was veiled until the cross. But see how Paul highlights that there is no difference between Jew and Gentile in Christ:
Therefore remember that at one time you Gentiles in the flesh, called “the uncircumcision” by what is called the circumcision, which is made in the flesh by hands—remember that you were at that time separated from Christ, alienated from the commonwealth of Israel and strangers to the covenants of promise, having no hope and without God in the world. But now in Christ Jesus you who once were far off have been brought near by the blood of Christ. For he himself is our peace, who has made us both one and has broken down in his flesh the dividing wall of hostility by abolishing the law of commandments expressed in ordinances, that he might create in himself one new man in place of the two, so making peace, and might reconcile us both to God in one body through the cross, thereby killing the hostility. And he came and preached peace to you who were far off and peace to those who were near. For through him we both have access in one Spirit to the Father. So then you are no longer strangers and aliens, but you are fellow citizens with the saints and members of the household of God, built on the foundation of the apostles and prophets, Christ Jesus himself being the cornerstone, in whom the whole structure, being joined together, grows into a holy temple in the Lord. In him you also are being built together into a dwelling place for God by the Spirit. -Ephesians 2:11-22
Those things which separated Jew from Gentile were all types and shadows of Christ. Now that the substance had come, the shadow gave way to the Light. This dividing wall was removed by the blood of Christ, and so Jew and Gentile are one. Gentiles were once strangers and aliens (lit., foreigners) of Israel, her covenants and promised blessings, but now Gentiles have been made fellow citizens (of Israel) and members of the household of God, having been grafted into the single Olive Tree, the corporate assembly of Israel. He made the two into one new man: the Body of Christ, the Church.
Paul reiterates this same concept when discussing why there were so many apostate Jews. The implicit question was this: If God promised to save Israel, and many Israelites are not saved, has God’s promise failed? Paul’s answer is this:
But it is not as though the word of God has failed. For not all who are descended from Israel belong to Israel, and not all are children of Abraham because they are his offspring, but “Through Isaac shall your offspring be named.” This means that it is not the children of the flesh who are the children of God, but the children of the promise are counted as offspring. -Romans 9:6-8
Ishmael was descended from Abraham, his seed according to the flesh, but Ishmael received none of the blessings promised to Abraham’s seed because he was not a child of the promise. Who now are children of Abraham? Paul’s argument explains:
What if God, desiring to show his wrath and to make known his power, has endured with much patience vessels of wrath prepared for destruction, in order to make known the riches of his glory for vessels of mercy, which he has prepared beforehand for glory—even us whom he has called, not from the Jews only but also from the Gentiles? As indeed he says in Hosea,
Those who were not my people I will call ‘my people,’
and her who was not beloved I will call ‘beloved.’
And in the very place where it was said to them, ‘You are not my people,’
there they will be called ‘sons of the living God.’ -Romans 9:22-26
This prophecy was originally made to Israel and concerning Israel, yet Paul here uses it as proof that both the called Jews and the called Gentiles are heirs of this promise. Who then are the children of Abraham? Who are the Jews?
For no one is a Jew who is merely one outwardly, nor is circumcision outward and physical. But a Jew is one inwardly, and circumcision is a matter of the heart, by the Spirit, not by the letter. His praise is not from man but from God. -Romans 2:28-29
Israel of promise had always been a spiritual identity, not a physical one. For many Gentiles were included in the corporate body of Israel in the Old Testament, including Rahab the Cannanite, the prostitute who aided the spies in Jericho; Ruth the Moabitess, wife of Boaz and great-grandmother of King David; Caleb the Kenizzite, one of the two faithful spies sent into the land of Canaan; and Obed-edom the Gittite, the man who kept the Ark of the Covenant in his house for three months. These all became Jews not by changing their ethnicity but by changing their religion. It was always a spiritual people, but beforehand the nation was a geo-political entity; now it is a spiritual entity:
But you are a chosen race, a royal priesthood, a holy nation, a people for his own possession, that you may proclaim the excellencies of him who called you out of darkness into his marvelous light. Once you were not a people, but now you are God’s people; once you had not received mercy, but now you have received mercy. -1 Peter 2:9-10
Peter applies all these terms used explicitly of Israel and even quotes a prophecy pertaining specifically to Israel and applies this to the church. Just in case it was not clear enough:
And if you are Christ’s, then you are Abraham’s offspring, heirs according to promise. -Galatians 3:29
Christians are the seed of Abraham, not those who are biologically related to him.
Also check out Dispensationalism: Taking the Bible “Literally”?