With the Fall and the Curse, "the Lord God sent him out from the garden of Eden to work the ground from which he was taken"1. Humanity is exiled from the paradise-temple-garden, but the nature of humanity's work is in some sense unchanged - to work the ground. Only, now it is the ground outside Eden, outside the specific presence of God's dwelling place.
In Exodus 19:5 we read "Now therefore, if you will indeed obey my voice and keep my covenant, you shall be my treasured possession among all peoples, for all the earth is mine; 6 and you shall be to me a kingdom of priests and a holy nation...." This is the first appearance of our title phrase. Here Israel is re-constituted on the basis of the covenant God cuts with them, on the basis of the Exodus-salvation he has wrought for them, into a community that reflects the embryonic community of Genesis 2. The formulation "kingdom of priests and a holy nation" cross-polinates the two notions we encountered in part 1 - mediation and regency. Israel is to function as a kingdom, a nation, a political entity. This entity, through the given Torah, is to reflect the rule and regnancy of their Lord - God himself. Likewise, they are to function as priests, holy, as the mediating presence of God in the world. This is also recast in terms of the actual particular presence of God, as it is formulated in the pillar in the desert, then the Ark, then the Temple. The dwelling presence of God in the Temple fulfils the Edenic picture of God among his people. Like humanity in Eden in the world, Israel is to function in 'the Land' in the broader context of the world.
1 Gen 3:23 ESV