John Hendryx posted a concise post regarding the real definition of “Israel” as used in the Scriptures. Referring to Ephesians 2:11-21, he writes:

Notice in this passage that Paul speaks to Gentiles as having been previously separate and alienated from Israel and the covenants, but in Christ, Gentiles have become citizens of Israel. Being “brought near” was their modern day parlance for Jewish proselytes. Because verse 12 and verse 19 are separated by some text (which speaks of benefits in Christ) many do not pay attention to their close connection. Let’s have a look then: Verse 12 “alienated from the commonwealth of Israel” is joined to (vr. 19) “you are no longer strangers and aliens”. No longer aliens to what? No longer aliens to the commonwealth of Israel. That means that Gentiles who are in Christ are now “citizens” (v. 19) of Israel built as a house with Christ as the chief cornerstone. In other words, Jesus Christ is the True Israel of God (its fulfillment and foundation) as are all who are joined in union to Him. To say it another way, both OT and NT saints who are in union with Christ are citizens of Israel according to this passage.

Full article is here: http://www.reformationtheology.com/2009/06/an_observation_about_israel_in.php