I have been crucified with Christ and I no longer live, but Christ lives in me. The life I now live in the body, I live by faith in the Son of God, who loved me and gave himself for me.
On Tuesday, a radio preacher described this verse as being #2 — after John 3:16 — in terms of verses every Christian should know. It is a great promise to hold on to, that Christ lives in me and I live life in him.
But contextually, Paul is writing about the transition that the new Jewish converts to Christianity must face: From living life under the law, to living life apart from the law. Here is the context with the verses before and after, and then commentary from Scot McKnight in the NIV Application Commentary (NIVAC) on these verses as sourced at BibleGateway.com
19 “For through the law I died to the law so that I might live for God. 20 I have been crucified with Christ and I no longer live, but Christ lives in me. The life I now live in the body, I live by faith in the Son of God, who loved me and gave himself for me. 21 I do not set aside the grace of God, for if righteousness could be gained through the law, Christ died for nothing!”
In converting to Christ, the Jewish Christian finds spiritual life through death, understood here as being crucified with Christ to the law so that the resurrected Christ might grant his new life to the believer (vv. 19–21). Paul says three things in this section.
(a) The “Jewish Ego,” the privilege Jews thought they had—but had only until Christ—died to the law. This took place when Paul (and Peter) converted to Christ. This they did so “I might live for God.” What Paul is describing here is not some mystical (daily) experience. He is describing the common conversion experience of Jews: when they turn to Christ, they die to the law as the means of salvation. And the law helps in that it runs its course until Christ (3:19).
(b) The life Paul now lives for God is the result of dying with Christ (v. 20). But the life Paul lives (“I”) is the life the Jewish Christian finds in Christ. It is a life of the indwelling Christ (cf. 2 Cor. 3:17) and the indwelling Spirit (Gal. 3:1–5; 5:22–23). When the Jewish Christian died to the law by dying with Christ (who absorbed the full wrath of God that came about because of the law’s work), that Jewish Christian was raised a new person: a post-law Jewish Christian. That person was now indwelt by Christ and the Holy Spirit, who would now guide and control.
(c) In opting for the Christ system, these Jewish believers were not setting aside God’s grace. Here we must infer that the accusation against the Jewish Christians was that they were setting aside God’s grace. Surely for them this grace was understood as the law of Moses. Paul counters: “No, it is not we who are setting aside God’s grace when we leave the law. Rather, you (who do not come with us) are missing the great grace of God in Christ.” In fact, Paul argues that everything in their conversion was for naught if a proper standing before God could be achieved by obeying the law. If that could have been done, there would have been no need at all for Christ. But these Judaizers had indeed confessed that Christ was God’s agent for salvation.