For more than a century, protestants/evangelicals have had only two main theological systems to choose from: Covenant and Dispensationalism. One alternative to these is New Covenant Theology, which I see as a sort of middle way. The article below, from solagratia.org, is a good introduction to NCT.
What Is New Covenant Theology?
By Mike Adams, Bill Knaub and Geoff Volker
New Covenant Theology (NCT) is a biblical approach to understanding God's unfolding plan of salvation. The focus of this approach is the work and person of Jesus Christ with emphasis on what God has accomplished and fulfilled in Christ for the elect. The Lord Jesus is the grand theme of both the New and Old Testament Scriptures which unifies all of the Bible as evidenced in Ephesians 1:7-10:
In him we have redemption through his blood, the forgiveness of sins, in accordance with the riches of God's grace that he lavished on us with all wisdom and understanding. And he made known to us the mystery of his will according to his good pleasure, which he purposed in Christ, to be put into effect when the times will have reached their fulfillment--to bring all things in heaven and on earth together under one head, even Christ.
The primary premise of NCT is that the New Covenant as mediated by Christ is a brand NEW covenant, which totally replaces the Old Covenant:
But the ministry Jesus has received is as superior to theirs as the covenant of which he is mediator is superior to the old one, and it is founded on better promises. For if there had been nothing wrong with that first covenant, no place would have been sought for another. But God found fault with the people and said "The time is coming, declares the Lord, when I will make a new covenant with the house of Israel and with the house of Judah. It will not be like the covenant I made with their forefathers when I took them by the hand to lead them out of Egypt, because they did not remain faithful to my covenant, and I turned away from them, declares the Lord. This is the covenant I will make with the house of Israel after that time, declares the Lord. I will put my laws in their minds and write them on their hearts. I will be their God, and they will be my people. No longer will a man teach his neighbor, or a man his brother, saying, `Know the Lord,' because they will all know me, from the least of them to the greatest. For I will forgive their wickedness and will remember their sins no more." By calling this covenant "new," he has made the first one obsolete; and what is obsolete and aging will soon disappear. (Hebrews 8:6-13)
The Old Covenant was a covenant that God established with the ancient Nation of Israel only. The terms of this covenant were the Ten Commandments or Tables of Stone:
Then the LORD said to Moses, "Write down these words, for in accordance with these words I have made a covenant with you and with Israel." Moses was there with the LORD forty days and forty nights without eating bread or drinking water. And he wrote on the tablets the words of the covenant--the Ten Commandments. (Exodus 34:27-28)
Moses summoned all Israel and said: Hear, O Israel, the decrees and laws I declare in your hearing today. Learn them and be sure to follow them. The LORD our God made a covenant with us at Horeb. It was not with our fathers that the LORD made this covenant, but with us, with all of us who are alive here today. (Deuteronomy 5:1-3)
Thus, the Ten Commandments were the essence of the Old (or first) Covenant only and Not the essence of all of God's law in every era. As the essence of the Old Covenant, the Ten Commandments function as its representative:
In addition, the Old Covenant was a legal, conditional covenant with Israel that demanded perfect obedience in order to receive the promised blessings:
Then Moses went up to God, and the LORD called to him from the mountain and said, "This is what you are to say to the house of Jacob and what you are to tell the people of Israel: `You yourselves have seen what I did to Egypt, and how I carried you on eagles' wings and brought you to myself. Now if you obey me fully and keep my covenant, then out of all nations you will be my treasured possession. Although the whole earth is mine, you will be for me a kingdom of priests and a holy nation.' These are the words you are to speak to the Israelites."
The primary function of the Old Covenant was a ministry of death.
He has made us competent as ministers of a new covenant--not of the letter but of the Spirit; for the letter kills, but the Spirit gives life. Now if the ministry that brought death, which was engraved in letters on stone, came with glory, so that the Israelites could not look steadily at the face of Moses because of its glory, fading though it was, will not the ministry of the Spirit be even more glorious? If the ministry that condemns men is glorious, how much more glorious is the ministry that brings righteousness! For what was glorious has no glory now in comparison with the surpassing glory. And if what was fading away came with glory, how much greater is the glory of that which lasts! (2 Corinthians 3:6-9)
The Old Covenant was historically time-bound and was a Pedagogue that the Israelites were obligated to obey perfectly until the promised seed of Abraham (Jesus Christ) would arrive:
So the law was put in charge to lead us to Christ that we might be justified by faith. Now that faith has come, we are no longer under the supervision of the law. (Galatians 3:24-25)
The New Covenant is a new and better covenant. Jesus Christ is the mediator of the New Covenant, which is founded on better promises:
But the ministry Jesus has received is as superior to theirs as the covenant of which he is mediator is superior to the old one, and it is founded on better promises. (Hebrews 8:6)
The New Covenant is made up of a totally regenerate membership since Christ has died only for His people (the elect) who receive the complete benefits of His reconciling work (Heb. 8:10-12; Heb. 7:25). Jesus Christ kept the terms of the Old Covenant perfectly and earned all the blessings for His people:
But when the time had fully come, God sent his Son, born of a woman, born under law, to redeem those under law, that we might receive the full rights of sons. Because you are sons, God sent the Spirit of his Son into our hearts, the Spirit who calls out, "Abba, Father." So you are no longer a slave, but a son; and since you are a son, God has made you also an heir. (Galatians 4:4-7)
All who rely on observing the law are under a curse, for it is written: "Cursed is everyone who does not continue to do everything written in the Book of the Law." Clearly no one is justified before God by the law, because, "The righteous will live by faith." The law is not based on faith; on the contrary, "The man who does these things will live by them." Christ redeemed us from the curse of the law by becoming a curse for us, for it is written: "Cursed is everyone who is hung on a tree." He redeemed us in order that the blessing given to Abraham might come to the Gentiles through Christ Jesus, so that by faith we might receive the promise of the Spirit. (Galatians 3:10-14)
Since Jesus is the mediator of the New Covenant, He is the new Lawgiver and Lord of the church:
If perfection could have been attained through the Levitical priesthood (for on the basis of it the law was given to the people), why was there still need for another priest to come--one in the order of Melchizedek, not in the order of Aaron? For when there is a change of the priesthood, there must also be a change of the law. (Hebrews 7:11-12)
In the past God spoke to our forefathers through the prophets at many times and in various ways, but in these last days he has spoken to us by his Son, whom he appointed heir of all things, and through whom he made the universe. The Son is the radiance of God's glory and the exact representation of his being, sustaining all things by his powerful word. After he had provided purification for sins, he sat down at the right hand of the Majesty in heaven. (Hebrews 1:1-3)
Thus, all Christians are under the authority of the New Covenant which is governed by the New Testament Scriptures:
Consequently, you are no longer foreigners and aliens, but fellow citizens with God's people and members of God's household, built on the foundation of the apostles and prophets, with Christ Jesus himself as the chief cornerstone. In him the whole building is joined together and rises to become a holy temple in the Lord. And in him you too are being built together to become a dwelling in which God lives by his Spirit. (Ephesians 2:19-20)
The Old Covenant has been perfectly fulfilled in Christ and done away. God's law is still binding on the believer in the New Covenant era, but God's righteous standards are contained in the Law of Christ, not the Law of Moses:
To the Jews I became like a Jew, to win the Jews. To those under the law I became like one under the law (though I myself am not under the law), so as to win those under the law. To those not having the law I became like one not having the law (though I am not free from God's law but am under Christ's law), so as to win those not having the law. (1 Corinthians 9:20-21)
Carry each other's burdens, and in this way you will fulfill the law of Christ. (Galatians 6:2)
NCT as seen above does differ from Covenant Theology and Historic Dispensationalism. In regards to Covenant Theology, the NCT view asserts that the 'Covenant of Works' and 'Covenant of Grace' cannot be found in Scripture. We would agree that God had a gracious purpose in placing the nation of Israel under the law as a covenant. However, this does not make the Old Covenant a covenant of grace. Scripture indicates that the purpose of the Mosaic Law was to bring deep conviction of sin to those under the Old Covenant:
What, then, was the purpose of the law? It was added because of transgressions until the Seed to whom the promise referred had come. (Galatians 3:19a)
But those sacrifices are an annual reminder of sins, because it is impossible for the blood of bulls and goats to take away sins.
In addition, NCT views the nation of Israel as a picture of the people of God but not the real people of God:
The law is only a shadow of the good things that are coming--not the realities themselves. For this reason it can never, by the same sacrifices repeated endlessly year after year, make perfect those who draw near to worship. (Hebrews 10:1)
For I do not want you to be ignorant of the fact, brothers, that our forefathers were all under the cloud and that they all passed through the sea. They were all baptized into Moses in the cloud and in the sea. They all ate the same spiritual food and drank the same spiritual drink; for they drank from the spiritual rock that accompanied them, and that rock was Christ. Nevertheless, God was not pleased with most of them; their bodies were scattered over the desert. Now these things occurred as examples to keep us from setting our hearts on evil things as they did?These things happened to them as examples and were written down as warnings for us, on whom the fulfillment of the ages has come.
(1 Corinthians 10:1-6, 11)
Thus, the nation of Israel is mainly the Unbelieving people of God who are rejected by God as a covenant nation:
When Jesus had entered Capernaum, a centurion came to him, asking for help. "Lord," he said, "my servant lies at home paralyzed and in terrible suffering." Jesus said to him, "I will go and heal him." The centurion replied, "Lord, I do not deserve to have you come under my roof. But just say the word, and my servant will be healed. For I myself am a man under authority, with soldiers under me. I tell this one, "Go," and he goes; and that one, "Come," and he comes. I say to my servant, "Do this," and he does it." When Jesus heard this, he was astonished and said to those following him, "I tell you the truth, I have not found anyone in Israel with such great faith. I say to you that many will come from the east and the west, and will take their places at the feast with Abraham, Isaac and Jacob in the kingdom of heaven. But the subjects of the kingdom will be thrown outside, into the darkness, where there will be weeping and gnashing of teeth." (Matthew 8:5-12)
While a remnant of the nation of Israel were true believers, New Covenant era believers are now the True people of God since Jesus has purchased all those in the New Covenant:
As you come to him, the living Stone--rejected by men but chosen by God and precious to him--you also, like living stones, are being built into a spiritual house to be a holy priesthood, offering spiritual sacrifices acceptable to God through Jesus Christ. For in Scripture it says: "See, I lay a stone in Zion, a chosen and precious cornerstone, and the one who trusts in him will never be put to shame." Now to you who believe, this stone is precious. But to those who do not believe, "The stone the builders rejected has become the capstone," and, "A stone that causes men to stumble and a rock that makes them fall." They stumble because they disobey the message--which is also what they were destined for. But you are a chosen people, a royal priesthood, a holy nation, a people belonging to God, that you may declare the praises of him who called you out of darkness into his wonderful light. Once you were not a people, but now you are the people of God; once you had not received mercy, but now you have received mercy. (1 Peter 2:4-10)
In NCT, the Ten Commandments are NOT the essence of the "Moral Law" but are seen as a Unit applying only as the terms of the entire Old Covenant with Israel. The Christian, then, is no longer bound by the terms of the Old Covenant. The Law of Christ is the objective standard for the New Covenant believer.
New Covenant Theology describes how the unfolding plan of salvation in Scripture is to be understood. It differs with both Covenant Theology and Historic Dispensationalism.
Relationship to Covenant Theology
Covenant Theology errs in trying to read the Old Covenant as though it were the New Covenant. It also errs in its view that the Ten Commandments are the essence of all of God's law in every era.
Relationship to Dispensationalism
Dispensationalism errs in reading the Old Covenant without taking into account the New Covenant.
The Old Covenant
The Old Covenant (Mosaic Covenant, also called the First Covenant) is a legal, conditional covenant, not another administration of the Covenant of Grace. Although God had a gracious purpose for giving the Mosaic Covenant the covenant itself is a legal covenant that was intended to show the Israelites their sin.
The Nation of Israel
The nation of Israel is the unbelieving people of God. Israel was a picture of the real people of God (the Church) that are fully revealed in the New Covenant era. Only a remnant of Israel were believers.
The Ten Commandments
The Ten Commandments are the essence or terms of the Old Covenant not the essence of all of God's law in every era. Although the New Covenant does restate 9 of the 10 (the Sabbath is excluded) as individual commands, the Ten Commandments as a unit are not brought into the New Covenant era. The essence of all of God's law is found in the 2 great commandments to love the Lord with all your heart and your neighbor as yourself, not in the Ten Commandments:
"Teacher, which is the greatest commandment in the Law?" Jesus replied: "Love the Lord your God with all your heart and with all your soul and with all your mind." This is the first and greatest commandment. And the second is like it: "Love your neighbor as yourself." All the Law and the Prophets hang on these two commandments." (Matthew 22:36-40)
The Abrahamic Covenant
The Abrahamic Covenant is a revealing of God's plan of salvation through Abraham and his physical descendants. The true seed of Abraham is Jesus Christ and the believers are the true children of Abraham.
The Law of Christ
The Law of Christ is the law in the New Covenant era. The issue is not whether or not believers in the New Covenant era are under law. The issue is which law are the believers under in this present era.