As Peter gets into the swing of his letter, he uses several metaphors to capture the mind of his readers. That is exactly what he does in this passage, using the metaphor of living stones, being built into a house.
You can see his imagery for yourself in 1 Peter 2:4-5.
This is one of the only sections of 1 Peter that is declarative, along with 1:1-12, while the rest of Peter’s letter is built around exhortations or imperatives. What this means is that this passage, along with the beginning of the chapter one, provide the foundation for the entire letter.
This section, examining the fact that the believers are God’s chosen people, is elemental to the rest of Peter’s encouragement to his first century audience, as well as later readers. This fact provides some immense motivation and encouragement as we understand our identity as God’s chosen people.
Peter begins this entire section (verses 4-10) with the imagery of stones and buildings. This is probably inspired by Psalm 118:22, which Jesus quoted, probably within Peter’s hearing. As a common tradesman, such imagery would have likely stuck in his head, and he uses it here to make his point clear.
Not only does he begin this word picture, but he takes it a step further by adding Jesus in as the “living” stone. And, in verse 5, he will include us in that description as well. That is encouraging, because, just like Jesus, Peter’s readers in Asia Minor were rejected by men, and yet were chosen by God and precious in his sight.