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What is the ‘capstone’?
Answer: It actually says “head of the corner” as in KJV. Also called “chief cornerstone,” this stone can refer to the last stone to be placed into a building. As in the used of ‘cornerstone,’ Peter’s main point in using the description is to emphasize the importance of what the rejected stone had become to the building.
What is Peter’s point in quoting Psalm 118:22?
Answer: The stone rejected by the builders was chosen by God, the chief builder, to be the capstone. Peter is pointing that Jesus Christ was rejected and crucified by his own people. But God who is building the spiritual house (verse 2:5) has chosen Jesus Christ to be the capstone of that building made up of all the believers in Jesus Christ.
The Messiah is the Chief Cornerstone which the Builders Rejected
Psalm 118:22-23 The stone which the builders rejected has become the chief cornerstone. This was the LORD’S doing; it is marvelous in our eyes.
Isaiah 28:16 Therefore thus says the Lord GOD: “Behold, I lay in Zion a stone for a foundation, a tried stone, a precious cornerstone, a sure foundation; whoever believes will not act hastily.
Matt 21:42-43 Jesus said to them, “Have you never read in the Scriptures: `The stone which the builders rejected has become the chief cornerstone. This was the Lord’s doing, and it is marvelous in our eyes’? “Therefore I say to you, the kingdom of God will be taken from you and given to a nation bearing the fruits of it.
– The “stone” is the Messiah, the “builders” are the Jews.
– The Jews forced Pilate’s hand in crucifying Jesus.
– The rejection of the Jewish Messiah by His own countrymen was the Lord’ doing, and it was planned before the foundation of the world.
– In ancient times the cornerstone was the stone at the corner of two walls that united them. It was the visible corner of the foundation of the building and the starting point of all future building above the foundation. It was the most costly stone because of its beauty and strength. It was also the largest, most solid and carefully constructed stone.
– To cast aside the cornerstone would be to resist any future building on that foundation.
– The Cornerstone was the place where the building was joined and also the place where it rested.
– Jesus was not only the Cornerstone but the “chief” (highest) Cornerstone.
– The stone is mentioned in the Book of Daniel as cut out of the mountains without hands and broken in pieces consuming all kingdoms and becomes a mountain that fills the whole earth.
– The new temple will exceed the former temple in its glory (Hag 2:9).
– In 1 Peter 2:4-10 the apostle Peter gives detail concerning Jesus as the stone.
– In Romans 9:32-33 Paul the apostle speaks about Jesus as the stone.
– The Hallel Psalms (Ps 113-118) also known as “Hallel” were sung at various festivals.
– These words were sung by the Jews on the feast of tabernacles, when carrying palm branches in their hands and pouring water on the pavement of the Temple symbolizing Messiah and His kingdom.
– This hymn was also sung by the Jewish children when Christ made his public entry into Jerusalem. (Matt 21:9).
– Jesus sung this farewell hymn with His disciples as He left the Passover for Gethsemane.
– The place which the rejected Jesus now bears in the church, and the honor bestowed upon Him as the head of the church, and the triumph of His gospel in the world, all testify that it is the work of God and it is marvelous in our eyes.
How could the stone the builders rejected become the capstone? Jesus tells a parable to illustrate it:
He went on to tell the people this parable: “A man planted a vineyard, rented it to some farmers and went away for a long time. At harvest time he sent a servant to the tenants so they would give him some of the fruit of the vineyard. But the tenants beat him and sent him away empty-handed. He sent another servant, but that one also they beat and treated shamefully and sent away empty-handed. He sent still a third, and they wounded him and threw him out. Then the owner of the vineyard said, ‘What shall I do? I will send my son, whom I love; perhaps they will respect him.’
But when the tenants saw him, they talked the matter over. ‘This is the heir,’ they said. ‘Let’s kill him, and the inheritance will be ours.’ So they threw him out of the vineyard and killed him. What then will the owner of the vineyard do to them? He will come and kill those tenants and give the vineyard to others.” When the people heard this, they said, “May this never be!”
Jesus looked directly at them and asked, “Then what is the meaning of that which is written: “‘The stone the builders rejected has become the capstone’?”
Jesus uses this story to say, “Well if this isn’t the meaning of Psalm 118:22, then what is?” At first this seems like a problem because this parable Jesus tells doesn’t seem to explain Psalm 118:22. In Jesus’ parable, the ‘stone the builders rejected’ is the son who gets killed. But I don’t see the ‘rejected stone’ coming back to glory in this parable (being made the capstone). So what’s going on here?
There is an old rabbinic parable used to explain Psalm 118:22, which I think sheds some light on this parable of Jesus’:
When Solomon’s temple was being built, it was forbidden for the sound of hammers to be heard at the job site because it was a holy place of worship. You can’t have worship with construction going on in the background! So it had to be quiet. What this meant for the construction was that each and every 20 ton stone had to have a ‘shop drawing’ and was made several miles away in the quarry. Several miles away each stone was carefully cut for its exact spot in the temple. From the very start, there was a plan for each stone. The very first stone to be delivered was the capstone, but that’s the last stone needed in construction. So the builders said, “What is this? This doesn’t look like any of the first stones we need. Put it over there for now.” Well, years went by and the grass grew over the capstone and everyone generally forgot about it. Finally the construction was done and the builders said “send us the capstone” and the word came back from the quarry “we already did”. They were confused. Then someone remembered what they had done with the very first stone sent to them. It was taken from its lowly position among the overgrown weeds where it had been forgotten, and it was honored in the final ceremony to complete the temple. Thus the scripture says, “The stone the builders rejected has become the capstone.” 
Just like Jesus’ parable, this rabbinic parallel is a picture of Jesus. When he came the first time, he didn’t fit the blueprint the builders thought they needed, so they tossed him aside as wrong and rejected him. They didn’t recognize him. And later, much later, they will realize their mistake and give him his rightful place as the capstone. I think there’s a reasonable chance that when Jesus said (paraphrase) “Well then what’s the meaning of Psalm 118:22?” he was calling to mind the familiar folk tale about the construction of the temple. This can be supported by how one of his closest disciples interpreted the passage. Listen to Peter as he explains Psalm 118:22:
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,”
–1 Peter 2:4-7, NIV
I find it interesting that Peter uses these words “as you come to him” and that you are being built into a “spiritual house”. “As you come to him” seems to invoke that image from the rabbinic parable about how stones came to the builders one at a time from the quarry where they had been carefully cut to the exact specifications of the blueprints. Then Peter uses the image of being built into a “spiritual house”. The word for “house” in Hebrew is “bet” which is the same word used many times for the temple. Many times in the Tanakh, when you see the words “the temple”, the Hebrew there could be more literally translated “the house”, since the temple was God’s house. Thus, Peter tells us that God has a blueprint for each of us, is shaping us, and is placing us in his spiritual temple as we come to him from the quarry (see Isaiah 51:1-2 for more on the quarry where we come from). He goes on to use more temple imagery: a holy priesthood and sacrifices that are acceptable to God. Peter then uses this temple imagery in connection with Psalm 118:22, imagery which is not found in Jesus’ parable explaining Psalm 118:22. It seems there is a clear connection between Peter’s understanding of how his rabbi taught about Psalm 118:22 and the rabbinic parable I quoted above. 
So what does it mean that Jesus, after telling the parable of the vineyard, evoked imagery of a common parable about the temple’s construction? To answer that question, we must look at another. The Jews at the time of Jesus did not know who the Messiah would be, and there were many competing theories as to his identify. Would he be called by God from a farm, a common peasant? Would he be a famous rabbi before being called by God? Some even thought there would be two messiahs, a priest messiah and a king messiah. Jesus here identifies the Messiah for us. He identifies the Messiah as the son of the owner of the vineyard. In the Tanakh, the vineyard is Israel, and the owner is God (e.g. Jer 12:10). In other words, by linking the ‘capstone’ (Messiah) to the son of the owner of the vineyard, Jesus declared his Messiahship and Sonship (deity) in one breath.