From “Righteousness, Mystical Union, and Moral Formation in Christian Worship”, by the Rev’d Dr. Gifford Grobien, Concordia Theological Quarterly, Vol. 77:1-2, January/April 2013:
Another way to support the classical understanding of the law and to recognize it not in opposition to the gospel, but working with the gospel, is to expand on the Lutheran understanding of the two kinds of righteousness. The two kinds of righteousness complements the doctrine of law and gospel, with its special conceptual strength being that it does not put law and gospel in opposition to each other, but reinforces their proper relationship. The twofold (or two kinds of) righteousness is a traditional way of speaking in Luther and the Confessions, if not as broad or extensive as the teaching of law and gospel.
I prefer to speak of the twofold, rather than two kinds of, righteousness. By referring to righteousness as one, twofold righteousness, I am emphasizing that all true righteousness comes from God through faith, both imputed and active righteousness. Both have Christ as their source. In other words, both the imputed, forensic righteousness that covers sin and the active righteousness of regeneration are received by grace through faith. The first is the merit of Christ; the second is the life and power of Christ, exercised by the Holy Spirit. As Luther says:
So there is no admitting a separation of the righteousness of faith and works, as though, in the manner of the Sophists, there were two diverse righteousnesses. But there is one, simple righteousness of faith and works, just as God and the human being (in Christ) are one person, and the soul and body are one human being.
I am not saying that justification, strictly speaking, is renewal in the broad sense. As the Formula explains, the regeneration or vivification of justification excludes the renewal, sanctification, and good works that result from justification. But I am saying, as the Formula also affirms, that renewal, sanctification, and good works do in fact result from justification, that is, the righteousness of faith. The active righteousness of faith comes forth from the passive righteousness of faith. The twofold righteousness of a Christian is received and exercised through faith, beginning with God’s declaration of righteousness on account of Christ’s merit, and continuing with this continued declaration and true renewal and sanctification in the Holy Spirit (SD III, 41). The active righteousness that stems from faith is “instilled” by Christ (cf. Luther’s Sermon on Two Kinds of Righteousness) or “created” by the Holy Spirit (SD III, 23). It is real righteousness, which nevertheless exists alongside the persistent, decaying flesh of our old nature (SD III, 32).
A justified person, therefore, is both declared and made righteous through faith, as Melanchthon declares several distinct times in Apology IV (73, 78, 117, 172b). To be made righteous does not mean that a person’s works justify him before God, or that he has been transformed into a new person with proper righteousness apart from Christ, but that faith “makes alive, that is, it cheers and consoles consciences and produces eternal life and joy in the heart” (Ap IV, 172b). As fruits of this new life, then, the Holy Spirit works sanctification and good works. Eberhard Jüngel explains:
If sinners are pronounce righteous by God’s judging Word― which is also pre-eminently creative in its judging power― and thus recognized by God as being righteous, then they not only count as righteous, they are righteous. Here we must again remind ourselves that the Word alone can in this way do both things at once: a judgement and a creative Word―a pardon and a Word which sets free.
A Christian who is really righteous, then, receives the law with joy and is instructed by it. Affirming the twofold righteousness strengthens the proper, confessional distinction between law and gospel, and the three functions of the law. Indeed the law condemns the sinful nature; the new, regenerate nature, however, delights in the law, embraces it, and learns from it.