This is another place from which Peter draws on what he writes in I Peter 2:5, 9—in fact, it is almost an exact parallel. Israel and the church were both separated from the world and made holy by God. Both became God's personal property, which is what the phrase "peculiar [special] treasure" means. In addition, because of what God did—by separating them from the world—both became obligated to meet priesthood requirements.
Israel's position was conditional upon obedience. Verse 5 says, "Now therefore, if. . . ." However, Israel immediately—within a couple of days—rejected God's offer through disobedience. They rejected their privilege.
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