The phrase “righteousness of God” in Romans 1:17 has been the subject of considerable dispute in recent years, with many abandoning a standard Protestant interpretation of the passage (i.e., that the righteousness of God refers to the righteousness that God gives) in favor of a more redemptive-historical understanding (righteousness as God’s faithfulness to Israel, or as His commitment to restoring good order in His creation).
One important, perhaps decisive, consideration has to do with Paul’s use of the word “gospel.” It is clear at the beginning of Romans 1 that “gospel” refers to the announcement or recital of the events of Jesus’ incarnation, death, and resurrection. It seems reasonable that he is using gospel in the same redemptive-historical sense in verse 17: the work of Jesus in history is the “good news,” and this is good news of God’s righteousness because through these events God demonstrates His righteousness. The redemptive-historical understanding of “righteousness of God” thus seems to be implied by the fact that Paul says this righteousness is revealed in “the gospel.”
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