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.
John W. Ritenbaugh
New Covenant Priesthood (Part 1)
This could be called the preface to the Old Covenant, as it presents in stark terms what the covenant is about. He lists its three main facets:
1. They were to obey His commands and keep His covenant. Recall that God chose Abraham because he would teach his children how to keep His way. The covenant set out the terms for their doing this. This was the Israelites' primary responsibility under the agreement.
2. They were to be a special treasure to Him—a people unlike all others in their relationship to God. The Israelites were to submit to God, and He in turn would help them, blessing and protecting them as only the great Creator God could. Thus, the covenant contained reciprocal responsibilities and benefits.
3. They were to be a kingdom of priests and a holy nation. This implies two additional concepts:
a. As a kingdom of priests, they were to fill the role of mediator or liaison between God and the other peoples of the earth. Just as He would work through the Levitical priesthood to the children of Israel, God would work through the people of Israel to the rest of the world.
b. As a holy nation, they would be set apart or separate from all other nations. He would require of them, as the people with and through whom He would work, that they be different, a cut above, of a higher standard. They had a responsibility to be a model for the Gentiles to observe and emulate.
John W. Ritenbaugh
Why Israel? (Part One)
Other Forerunner Commentary entries containing Exodus 19:4: