In holiness and sexuality, David Peterson writes this correct observation:
Under the Sinai Covenant, Israel was set apart by God to be his own ‘treasured possession among all peoples’, ‘a kingdom of priests and a holy nation (Ex. 19:5-6; cf. Dt. 14:2). Holiness was a status conferred by divine promise and divine redemption. It was also a calling to be lived out in obedience to God’s voice and in keeping the covenant he had made with them. A common factor in the terms describing Israel’s vocation in Exodus 19:5-6 is the note of separation from the nations, so as to be uniquely at God’s disposal. As ‘a holy nation’, they were to demonstrate what it means to live under the direct rule of God, with God’s sanctifying presence in their midst. As ‘a priestly kingdom’, they were to serve the Lord exclusively and thus be a people through whom his character and will might be displayed to the world. In this way, God’s original promise to bring blessing to all the nations would be enacted (cf. Gen. 12:1-3).
It is important to dwell on this last point. Israel’s sanctification was meant to be for the blessing of the nations. As Israel fulfilled her holy calling, the attractiveness of being in a relationship with the one true God would be demonstrated to the whole world. God’s creation purposes, marred and obscured because of sin, would be enacted and thus made clear to all. But the rest of the Old Testament shows how Israel compromised her calling and adopted the beliefs and practices of the nations. Judgement, rather than blessing and salvation, was the consequence of a lack of holiness.
Under the Sinai covenant, pollution and sin were to be avoided in every aspect of life, and there was to be a complete break with every form of idolatry and false religion. Separation from the nations and consecration to God were two different facets of their exclusive relationship with the Lord.